Using the VIX to Distinguish between Transitory and Persistent Risk

11 Pages Posted: 23 Aug 2022

Date Written: August 3, 2022

Abstract

The volatility of the VIX Index has at times caused the impression that it is less than reliable as an indicator of risk. VIX futures and the volatility surface provide clearer information about the market perception of risk and should be used in conjunction with the VIX Index. The different movements of the VIX Index, VIX futures and of the volatility surface historically fall into four major categories that can be useful in understanding the level and length of equity market risk perceived in the options market.

Keywords: VIX, Volatility, Vol Surface, Term Structure, Lehman, March 2020, Crisis

Suggested Citation

Niculescu, Peter, Using the VIX to Distinguish between Transitory and Persistent Risk (August 3, 2022). Available at SSRN: https://ssrn.com/abstract=4182618 or http://dx.doi.org/10.2139/ssrn.4182618

Peter Niculescu (Contact Author)

Capital Market Risk Advisors ( email )

United States

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