Some More Forward Risk Arbitrage

VIX-VXV hits steepest levels in a long time. Short-term vol being driven down by dispersion traders (selling correlation), cyclical/seasonal pressures, and risk transfer. Then again all these synthetic risk measures are likely screwed up beyond belief.

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Forward Volatility Differential Plunges To 2008 Lows

The VIX - VXV relationship has dropped to a 2009 low, implying the 3M forward vol is abnormally high (projected volatility) relative to 1M (VIX), and extreme lows coincide with index turning points.



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Implied Vol Ratio At Inflection Point

The ratio of VIX (1 month fwd implied vol) to VXV (3 month) has dropped to a low of 0.92, a level crossed to the downside only 7 times over the past 2 years, and usually as a leading indicator of market downside activity. However, in this environment, where a majority of corporate risk is nationalized, and the only traders are a few tireless SPARK stations, it is anyone's guess whether this metric is relevant for anything anymore.

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