Market Measures

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IV Overstatement in Turbulent Markets

Market Measures

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In today’s Market Measure, Tom and Tony look at how often and how severely realized volatility overstates implied volatility. In other words, how much does the expected market movement underestimate actual market movement in periods of market selloffs like we’re experiencing right now.

We find that in this selloff, we had the largest underestimation of market volatility in history where the actual volatility was five times higher than what was predicted by implied volatility.

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