It is a cruel twist of fate that the product developed to allow dealers and hedge funds to trade volatility as an asset class has come to be paralysed by volatility itself.

The extreme moves in stocks and indices over the past four weeks have left some in the market nursing losses in equity derivatives. Liquidity has become scarce and, although there is activity in the market for one of the most popular products of recent years - variance swaps on single stocks - it is by appointment only.