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Volatility as described here refers to the actual volatility, more specifically: . actual current volatility of a financial instrument for a specified period (for example 30 days or 90 days), based on historical prices over the specified period with the last observation the most recent price.
The New Market for Volatility Trading. Journal of Monetary Economics. Brenner, M. & M. Sokoler. Inflation Targeting and Exchange Rate Regimes; Evidence from the Financial Markets. Review of Finance. Brenner, M.; R. Sundaram & D. Yermack (July 2000). Altering the Terms of Executive Stock Options. Journal of Financial Economics. pp. 103–128.
Volatility is up, and the S&P 500 chalked both its best and worst day of the year this past week. And that you can have both in the span of a few days is an important market lesson.
Financial Analysts Journal, (Mar/Apr 1999); pp. 73–82. Daigler, Robert T., and Laura Rossi. "A Portfolio of Stocks and Volatility." The Journal of Investing. (Summer 2006). Fleming, Jeff, Barbara Ostdiek, and Robert E. Whaley, "Predicting Stock Market Volatility: A New Measure," The Journal of Futures Markets 15 (May 1995), pp. 265–302.
The price of this option is influenced by multiple factors, including the stock’s current price, the option’s strike price, time to expiration and implied volatility.
Volatility index (VIX): Often referred to as the “fear index,” the VIX measures market expectations for future volatility. It is calculated based on the prices of options on the S&P 500 index.
Bottom line. The VIX is an index that measures expectations about future volatility. It tends to rise during times of market stress, making it an effective hedging tool for active traders.
A more recent extension for handling cluster volatility, negative interest rates and different distributions is the so-called "CIR #" by Orlando, Mininni and Bufalo (2018, [5] 2019, [6] [7] 2020, [8] 2021, [9] 2023 [10]) and a simpler extension focussing on negative interest rates was proposed by Di Francesco and Kamm (2021, [11] 2022 [12 ...