Credit Suisse is defending a controversial financial product it issued that played a role in the staggering market losses last week.
People shorted volatility at their own risk, Credit Suisse CEO Tidjane Thiamtold CNBC on Wednesday, when asked about the losses suffered by investors who used complex volatility trading tools, issued by several firms including his bank.
On Monday last week, as markets sold off and the Dow Jones industrial average plunged nearly 1,600 points in its biggest drop ever, many analysts pointed to the XIV as having amplified selling.
The XIV stands for the VelocityShares Daily Inverse VIX Short-Term exchange-traded note (ETN). The product, managed by Credit Suisse and of which it owns 32 percent, shorts volatility by betting on calm market conditions. It has increased in popularity in the past year as volatility in the Cboe Volatility Index (VIX) — a fear gauge for the stock market — reached historic lows.