The So-Called Financial Lexicon

Every time I write about financial journalism, I always end up sounding cantankerous and bitter. So let’s start things off with some genuine praise. The story “Biggest VIX Drop Hides Options Bets S&P 500 Will Fall” yesterday from Bloomberg includes the following:

The reading indicates a 68 percent likelihood the S&P 500 will fluctuate as much as 7.3 percent in the next 30 days, according to data compiled by Bloomberg. That compares with the VIX’s all-time high of 80.86 in November, when traders priced in a swing of 23 percent in the S&P 500.

It’s nice to see some mention of the fact that volatility indexes measure expectations within one standard deviation of the mean. It is a simple point, but ignorance of it can lead to all manner of absurd proclamations (as I’ve discussed before).  So again, nice to see Bloomberg getting it right.

However, whoever manages their style guide needs to give me a call, on pain of semantic confusion. In the same story cited above, we read:

The premium on so-called put contracts increased even after the Chicago Board Options Exchange Volatility Index, a gauge of U.S. options prices known as the VIX, fell 40 percent last quarter.

I apologize for the pedantry below, but this usage is just grating. And more importantly, it appears constantly in Bloomberg stories. If you don’t see the trouble, read on.

The English adjective “so-called” has two meanings, and neither of them is appropriate in this context.  The first meaning is that the name being given is a popular or common one, with no negative connotation. One convention of usage is to give the formal or official name, if available, along with the popular term, e.g. “the so-called CAFE standard, or Corporate Average Fuel Economy.”  The second meaning casts doubt on the correctness of the term, as in “she was abandoned by her so-called friends.”

Again, neither meaning is appropriate here. “Put contract” is not, on the first interpretation, the popular or attributed name for some alternately-named entity that gained popularity in Chicago and that gives its buyer the right but not the obligation to sell the underlying asset at a specified price at some future date.  Such an entity just is a put, in the same way that an object that usually tastes sweet and keeps the doctor away if consumed daily just is an apple. It’s not a “so-called apple.”  Bloomberg doesn’t give an alternative or more official name for put contracts (since there is none), so if we are to apply the first interpretation of “so-called,” we can only wonder at the lax approach to other terms: if the editors were being consistent, shouldn’t we also read about the “so-called stock market” and the “so-called Standard & Poor’s 500 Index”? After all, it’s only called the Standard & Poor’s 500 Index because the company chose to call it that, and on this hyper-attributive semantics, it’s apparently essential to note that all language is conventional before the use of each noun.

The reductio above suggests that we look to the second meaning of “so-called” for some clarity. But reading “so-called put contracts” in a skeptical or repudiating spirit doesn’t make sense, either. And interpretive charity requires we assume that the editors don’t intend to suggest that, while these derivatives have been known as put contracts, they’re really something else entirely, as though the CBOE actually exchanges chocolate eclairs.

But then the “so-called” in that phrase either a) causes confusion, if you require that it mean one of its available meanings, or b) fails to signify, if you’re so forgiving as to treat it as a meaningless cipher.  Either way, it should be removed. I haven’t even discussed the other attributive nonsense in the same sentence, the clause that includes “known as the VIX.” Bloomberg stories are always and forever taking a disquotational approach to the three letters V-I-X, as though traders the world over talk constantly about the Chicago Board Options Exchange Volatility Index and only some traders also refer to it as “the VIX.” Clearly, the opposite is the case. And as I said, this isn’t a one-off mistake, but a regular phenomenon: this recent story about the VIX speaks of “so-called implied volatility, which measures the expected price swings of an underlying asset and is a barometer of options prices…” Again, neither meaning of “so-called” makes any sense, unless you think that what people call implied volatility isn’t really implied volatility, or that it would also make sense to speak of “the so-called unemployment rate.”

The most plausible explanation I can muster for this attributive tic is that the Bloomberg editorial staff is prepared to sacrifice readability for the sake of its readership, who are known as particularly unsophisticated when it comes to options.  In other words, “so-called” has a new meaning in the mouth of a Bloomberg editor, namely, “here’s a term that you surely don’t know, and we’re going to define it for you in just a second [which is another supremely annoying and style-murdering tendency -Ed.], but so that your pampered and minimally literate Hamptons-summering ass doesn’t feel threatened, we’ll denote that this term is just a thing people use to refer to something else, i.e. isn’t it cute how the middle classes have to bother about learning such dirty things as words?”

Related posts:

1. The So-Called Financial Lexicon Every time I write about financial journalism, I always...
2. The So-Called Financial Lexicon Every time I write about financial journalism, I always end...
3. Volatility Tracker: Implied Correlation Volatility Tracker for the week of July 27, 2009 Equities...
4. Volatility Tracker for the Week of July 6, 2009 Volatility Tracker for July 6, 2009 The mean reversion in...
5. Volatility Tracker for the Week of July 6, 2009 Volatility Tracker for July 6, 2009 The mean reversion in...