Some investors are risk loving as they are seeking for higher returns. Recently hedge funds are embracing bundles of credit default swaps, which have been blamed for exacerbating the last financial crisis. This shows the low volatility in the credit market forces investors including the hedge funds to seek other ways to generate higher returns.
Low volatility means there is a very low risk level in the market, also means a low level of return rate. This is good for very conservative investors including some pensioners. However, when the volatility is extremely low, it cannot satisfy the interests and expected returns of the investors in the market. Under certain circumstances, it may not satisfy all investors especially when the return rates are lower than the inflation rates.
Moreover, individuals' risk preferences are dependent of individuals' personal finance and their standing environment. When an individual has nothing to lose, he or she would become extremely risk loving. Some criminals are bad examples of such risk loving. Moreover, when the welfare system is able to deliver safe nets, it may give people more incentives to take some risky actions, as they do not need to worry they will fall into poverty after failure.
I am thinking if it is possible for us in the future that everyone is able to receive comfortable enough good and service supply and those who have adventure spirit are free to take all kinds of adventure as they will as there is no cost for the failure.
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