The macro outlook is still bleak: Inflation remains elevated, the probability of recession is rising, and the Federal Reserve continues to withdraw liquidity from financial markets. But investors are not pricing in higher future volatility. And many have no idea about, much less any interest in, buying convexity to hedge tail risk. It’s a signal to Nancy Davis, the chief investment officer of Quadratic Capital Management, and Kris Sidial, the co-CIO of The Ambrus Group, of widespread complacency. Nancy and Kris – experts in rate volatility and equity volatility, respectively – discuss investors’ assumptions about future volatility, as indicated by options pricing, and argue in favor of volatility itself as the best hedge in a new market regime. Recorded on September 16, 2022.