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Market Measures

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IVR Adjustments

Market Measures

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As we discussed on Friday, large moves in Implied Volatility will skew IVR to underestimate the current level of IV inflation relative to historical averages.

Today we are going to cover this topic in more detail to determine how likely IV contraction is at some IVR, given whether there were IV outliers in the previous year.

We find that, although selling premium for IVR > 30 is a good rule of thumb on average, this threshold tends to vary in the context of outlier events.

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