Robinhood says Gamestop volatility was a “1 in 3.5 million” black swan

Ready, take aim, and let fly...

Enlarge / Prepared, take intention, and let fly… (credit score: Aurich Lawson / Getty Photos)

Robinhood’s transfer to quickly restrict purchases of GameStop and different extremely unstable shares in late January was the overwhelming focus of at present’s Home Committee on Monetary Providers listening to.

On the listening to, Robinhood CEO Vlad Tenev stated that excessive inventory volatility that led to Robinhood’s restriction was a “5 sigma” occasion with a “1 in 3.5 million” probability of taking place. That made the scenario virtually unattainable for the corporate to plan for, Tenev stated. “Within the context of tens of hundreds of days within the historical past of US inventory market, a 1 in 3.5 million occasion is principally unmodelable.”

As we have lined beforehand, the excessive volatility of GameStop and different so-called “meme shares” final month meant Robinhood was all of the sudden compelled to offer way more collateral to the inventory clearing homes that really course of its trades. Tenev stated Thursday that these collateral obligations elevated tenfold between January 25 and January 28, as GameStop rose from $76 a share to over $347, then again all the way down to $193.

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