New York/London — When the Chicago Board Options Exchange (Cboe) sat down with Goldman Sachs traders in 2003, it would prove to be one of the most profitable meetings in the exchange’s history. It set in motion the creation of a wave of financial products built around the concept of trading volatility in markets. The appeal of betting on whether equity markets will remain calm has sharpened in recent years as historic bond-buying programmes by central banks have repressed volatility across equities and debt. Now, as robust economic growth convinces central banks to reduce their support for asset prices, the sheer scale of the volatility-trading ecosystem that has ballooned is worrying some investors and analysts who believe that this week’s turmoil is merely the first instalment of a shock for global markets. The traders at Goldman Sachs pitched to executives at the Chicago-based Cboe a futures contract based on the exchange’s Vix volatility index, a measure of expected market volat...

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