Tuesday, June 9, 2009

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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