Hello and welcome. You are listening to Patrick Boyle on Finance, a podcast exploring ideas from quantitative finance,

examining events occurring in markets right now and financial history to see what lessons can be taken away,

including interviews with some of the most interesting people in the world of finance. To learn more about the podcast, visit onfinance.org.

This Monday was one of the worst days for global stock markets in years. Stocks in the US, Europe and Japan

tanked on Friday and again on Monday, before a partial rebound.

Bond yields and foreign exchange rates swung around wildly too.

The VIX Index, a measure of expected US stock market volatility, rocketed to its highest level

since the pandemic meltdown in early 2020.

The VIX essentially tracks how expensive stock options are

and can be seen as a measure of how worried investors are

about large market moves in the near future, either up or down.

It had been sitting at around 12 for most of the year,

which was quite low and implied that investors expected

calm, before rocketing to 65 on Monday. It has since returned to a more moderate 22.

Japan, which we've talked about quite a lot here over the last year, was at the centre of the

storm. The Topics Index fell 12.2% on Monday, having hit an all-time high just three weeks earlier.

The sell-off wiped out its entire year-to-date gains.

The press described it as the worst Japanese market crash since 1987, something we'll come

back to in just a moment. The index rebounded 9% the next

day, prompting the FT to describe it as trading like a penny stock, which is not what you

want to hear about the third largest economy in the world. US markets, which had been strong

all year, fell almost 8% from their recent highs, and the

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