The North Korean missile crisis is straining stock markets worldwide. (AP Photo/Richard Drew)
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After this week's war of words between the United States and North Korea triggered the biggest fall in global stocks since the U.S. presidential election, investors are wondering what other off-radar shocks may be waiting to rock world markets. Although there is little sign so far that investors are protecting themselves against a major sell-off, some say the current environment masks latent risks.Such has been the extraordinary period of stability in financial markets in recent years that world stocks have hit a series of record highs while gauges of broad market volatility have plunged to record lows.Broad market gauges of risk, such as the CBOE Volatility Index, better known as the VIX, and its bond market counterpart, the Merrill Lynch Option volatility index remain pinned near record lows despite a spike this week.The proportion of stocks on the main U.S. benchmark equity index that are now owned by such passive investors has nearly doubled since the 2008 crisis to 37 percent.But redemption pressures on large passive investors could exacerbate any market selloff.
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