Artemis Capital Management L.P. is an investment management and research firm that employs systematic, quantitative, and behavioral based trading models to generate returns from market volatility. The flagship Artemis Vega Fund L.P. seeks to generate crisis-alpha from volatility derivatives and profit from periods of volatility dislocation and systemic crisis.
Artemis is intended to provide exposure to the left and right sides of the return distribution that, when combined with traditional asset beta, can improve the risk adjusted performance of an institutional portfolio. Artemis Capital Management L.P. and Artemis Capital Advisers L.P. were founded and associated portfolios managed by Christopher Cole, CFA.
Artemis Capital Management is registered with the Commodity Futures Trading Commission (“CFTC”) as a commodity pool operator (“CPO”) and is a member of the National Futures Association (“NFA”).
Latest research papers published by Artemis Capital Management.
Latest research papers published by Artemis Capital Management.
Dorothy Thompson once said “peace is not the absence of conflict”. Never forget there is a form of peace and stability reinforced by a foundation of underlying volatility. Game theorists call this the paradox of the Prisoner’s Dilemma, and it describes a dangerously fragile equilibrium achieved only through brutal competition. The Prisoner’s Dilemma is the most important paradigm for understanding shadow risk in modern financial markets at the pinnacle of a multi-generational debt cycle unparalleled in the history of finance. Global Capitalism is trapped in its own Prisoner’s Dilemma; forty four years after the end of the Bretton Woods System global central banks have manipulated the cost of risk in a competition of devaluation leading to a dangerous build up in debt and leverage, lower risk premiums, income disparity, and greater probability of tail events on both sides of the return distribution. Truth is being suppressed by the tools of money. Market behavior has now fully adapted to the expectation of pre-emptive central bank action to crisis creating a dangerous self-reflexivity and moral hazard. We are nearing the end of a thirty year “monetary super-cycle” that created a “debt super-cycle”, a giant tower of babel in the capitalist system. As markets now fully price the expectation of central bank control we are now only one voltage switch away from the razors edge of risk. Do not fool yourself - peace is not the absence of conflict – peace can exist on the very edge of volatility.
The next great crash will occur when we collectively realize that the institutions that we trusted to remove risk are actually the source of it. The truth is that global central banks cannot remove extraordinary monetary accommodation without risking a complete collapse of the system, but the longer they wait the more they risk their own credibility, and the worse that inevitable collapse will be. In the Prisoner’s Dilemma, global central banks have set up the greatest volatility trade in history.
To download the full article published in October 2015, click here. Opens in a new window.
CFA Institute Conference Proceedings Quarterly
January 2014 | Vol. 31 | No. 1
The following is the abstract from the article "Volatility: The Market Price of Uncertainty" by Christopher Cole from Artemis Capital Management LLC.
Today’s securities markets are pricing in yesterday’s crash, the known unknown, rather than tomorrow’s unknown unknown. To understand volatility as an asset class is to value the forward expectation of uncertainty, which is as much a function of human psychology as it is an expression of mathematics. Since the financial crisis, the pricing of volatility derivatives has undergone wide-scale changes that reflect classic behavioral biases. Not only is volatility an asset class, but in fact, it may end up being the most important asset class for institutional portfolios over the next decade. A strategy of “crisis alpha,” defined as the strategic acquisition of mispriced volatility, is a powerful way to navigate future uncertainty.
To download the full article published in January 2014, click here. Opens in a new window.
The following is an excerpt from the research article "Volatility of an Impossible Object: Risk, Fear, and Safety in Games of Perception" from Artemis Capital Management LLC.
The global financial markets walk on the razors edge of empiricism and what you see is not what you think, and what you think may very well be impossible anyway. The impossible object in art is an illustration that highlights the limitations of human perception and is an appropriate construct for our modern capitalist dystopia. Modern financial markets are a game of impossible objects. In a world where global central banks manipulate the cost of risk the mechanics of price discovery have disengaged from reality resulting in paradoxical expressions of value that should not exist according to efficient market theory. Fear and safety are now interchangeable in a speculative and high stakes game of perception. The efficient frontier is now contorted to such a degree that traditional empirical views are no longer relevant. The volatility of an impossible object is your own changing perception of risk.
To download the full article published on October 4, 2012 click here. Opens in a new window
The following is an excerpt from the research article "Volatility at World’s End: Deflation, Hyperinflation and the Alchemy of Risk" from Artemis Capital Management LLC. Click for PDF Download Opens in a new window
Imagine the world economy as an armada of ships passing through a narrow and dangerous strait leading to the sea of prosperity. Navigating the channel is treacherous for to err too far to one side and your ship plunges off the waterfall of deflation but too close to the other and it burns in the hellfire of inflation. It is said that de-leveraging is a perilous journey and beneath these dark waters are many a sunken economy of lore. Print too little money and we cascade off the waterfall like the Great Depression of the 1930s... print too much and we burn like the Weimar Republic Germany in the 1920s... fail to harness the trade winds and we sink like Japan in the 1990s. On cold nights when the moon is full you can watch these ghost ships making their journey back to hell... they appear to warn us that our resolution to avoid one fate may damn us to the other. Volatility at World's End symbolizes a new paradigm for pricing risk that emerged after the 2008 financial crash and is related to our collective fear of deflation.
To download the full article published on March 30, 2012 click here. Opens in a new window.
Recent press for Artemis Capital Management
Recent press for Artemis Capital Management
This video was first shown in conjunction with Christopher Cole's speech at the 2012 Global Derivatives and Risk Management Conference in Barcelona, Spain.
"Nobody will deny there is roughness everywhere..." Benoit Mandelbrot
The movement of stock prices has been an obsession for generations of speculators and traders. On a higher level, mathematicians believe that modern markets are an extension of the same fractal beauty found in nature. Visualized, these stock markets may take the shape of a turbulent ocean with waves made of human hopes, dreams, greed and fear.
Merging the world of high-finance and high-art, Artemis Capital Management is proud to present a creative visualization of stock market volatility over the last two decades. "Volatility at World's End: Two Decades of Movement in Markets" is a depiction of real stock market volatility using trading data from 1990 to 2011. The visual are designed from S&P 500 index option data replicating the implied volatility wave (or variance swap curve) extending to an expiration of one year. The front of the volatility wave contains the same data used to calculate the CBOE VIX index. The movement of this wave demonstrates changing trader expectations of the futures stock market volatility. As the wave moves through time, the expected (or implied) volatility surface transforms into a realized volatility surface derived from historical S&P 500 index movement. The transition represents what professional traders call "volatility arbitrage." The color variation in the volatility waves show the volatility-of-volatility or internal movement of the wave. The track underneath the volatility wave represents underlying S&P 500 index prices.
To download the corresponding article, please click here.
Artemis Capital Management LP selects candidates with a strong interest in global investments and trading with demonstrated talent in computer programming, data science, derivatives valuation, probability theory, and global macroeconomic thinking.
Artemis is currently hiring for quantitative positions. If you're interested in applying, please take our recruiting exam.
If you are interested in joining the Artemis team, for full-time or internship positions, please e-mail your resume to firstname.lastname@example.org
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