The Greeks & Volatility: Determining an option's risk premium is an inexact science
Traders Magazine, August 2006
There's a lot of talk about volatility in the financial world these days. In fact, it seems like the Chicago Board Options Exchange's Volatility Index (VIX) has become the bellwether for market sentiment. The VIX, which measures the front month volatility of S&P 500 index options, has hovered near historic lows for years despite an explosion of volume in the options markets. However, the VIX has nearly doubled in recent months, prompting fears of a correction in the broad market.
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