Episode summary
The War No One Can Price | The Weekly Wrap – 3/22/2026
Excess Returns
· · 1 hr 11 min · Guests: Jared Dillian, Brent Kochuba, D.A. Wallach
Summary
Markets spent the week trying to price war risk, but the episode’s core argument was that they often do not fully discount obvious geopolitical events until the shock is unavoidable. Jared Dillian said the Ukraine invasion and the Iran situation both fit a pattern of “willful ignorance,” where investors pretend the risk is not real until it hits. He also framed war as a binary event that is inherently hard to price ahead of time, which leaves room for both upside and downside surprises.
Brent Kochuba focused on what options and volatility data are saying now. He argued that the spread between the VIX and realized volatility is unusually wide for a market with the VIX only around the low 20s, which suggests hedging is elevated even though the underlying market has not yet moved much. His concern is that a modest equity selloff could suddenly turn into a much larger volatility spike if realized volatility starts to catch up.
The macro discussion turned to the Fed and oil. Dillian argued that oil shocks are not only inflationary but also demand-destructive, which makes the policy response much harder than a simple hawkish reaction. The episode also highlighted D.A. Wallach’s biotech framework: early-stage biotech is best understood as a portfolio of options, where each drug program has its own probability-adjusted path to value.
Key takeaways
- Jared Dillian said markets often underprice war risk until the event is no longer avoidable, creating mispricing around binary geopolitical outcomes.
- Brent Kochuba said the VIX-realized volatility spread is unusually wide, implying heavy hedging even though realized market movement has stayed muted.
- Dillian argued that oil shocks can be both inflationary and deflationary because higher energy prices also destroy demand.
- The panel said the Fed is likely to stay cautious because cutting into $100 oil would be politically and economically risky.
- D.A. Wallach framed early-stage biotech as a portfolio of options, with each drug’s value depending on stage-specific probabilities and costs.
Notable quotes
“Like it's it's very st it's like a strange psychological phenomenon. It's almost like like willful ignorance”
“So, it's very unusual to get this big V premium when the VIX is just at 25”
“I think at some point we finally get that 2 three four 5% equity market draw down”
“the Fed can't cut into $100 oil, which is true”
“So, the typical biotech company uh in its early stages is not selling any product commercially”
How the episode opens
Sometimes it doesn't discount the very obvious things. Like it's it's very st it's like a strange psychological phenomenon. It's almost like like willful ignorance like I'm just going to pretend this thing goes away, you know? I'm just going to pretend this doesn't exist until I can't ignore it anymore.
If you look back at the biggest spreads here, which is what this is, right? You're talking about uh the great financial crisis, right? Or you're seeing a huge spike right around the COVID situation or in April, right?
where the the financial market seemed like it was going to seize. All of those had VIX of 40 plus or even higher, right? That's where you get this really big premium.
So, it's very unusual to get this big V premium when the VIX is just at 25. Welcome to the Excess Returns weekly recap. I'm Jack Forehand joined by my good friend Matt Ziggler.
And Matt, I think it's fair to say the market has got a little exciting this week. Maybe
The market got exciting. Special shout out four words of the week which are two two-word phrases. I feel like this is my entire week is revolved around inference inflection which I don't know if that's been has that been in your life too and dynamic hedging.
Feel like all the excess returns conversations had dynamic hedging in them somewhere or some type of options part. And this inference inflection came out of the the Jensen Wang Nvidia presentation and it's just like I've been jokingly like fitting it into work meetings just because I feel like it's my latest buzzword of choice. Well, dynamic hedging is is a great theme and first of all, I didn't even know that that was a talent book.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- war risk pricing
- implied vs realized volatility
- options flows and hedging
- oil prices and fed policy
- biotech investing valuation
Watch the episode
Watch “The War No One Can Price | The Weekly Wrap – 3/22/2026” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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