4 ms·
What was the cost of the flash crash? As I see it, the important take away from it wasn't the crash, but the immediate rebound. That's evidence of the inherent
by mseebach 15y ago
What was the cost of the flash crash? As I see it, the important take away from it wasn't the crash, but the immediate rebound. That's evidence of the inherent stability of the set up, rather than the opposite.
Yes, some people living on the edge of the market, picking pennies in front of steam rollers, probably had a few days shaved off their life expectancies due to adrenalin spikes, but I could really care less.
- rscale 15y agoThe cost is quite hard to measure. An asset that can decline 10% in 5 minutes without any changes in it's fundamentals is likely to trade lower than one that can't, and that volatility (or perception of volatility) has a cost. The most substantial costs were probably borne by unlucky individuals who had stop-losses that executed solely due to the downward spike, and afterwards found themselves facing a loss, and possibly a tax bills, but I have no idea how common that situation was. I do know that one of my close friends booked his career best day that day, so surely there were also some people who took substantial losses because they didn't expect the problem that occurred.