The Cost of Volatility To Your Portfolio [View article]
With regard to Al Capital's comments:
VIX is the implied volatility in current prices of near-term options. This means that VIX is the level of volaility that people are paying for in the near term. We may think of this as tending to be the more sophisticated money--maybe. VIX tracks realized volatility (actual trailing volatility of returns) very well---not perfectly, but closely. In other words VIX and real short-term volatility track each other very well---RiskMetrics has documented this extensively.
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With regard to Al Capital's comments:
Jun 12 10:55 am
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All Comments by Geoff Considine »The Cost of Volatility To Your Portfolio [View article]
VIX is the implied volatility in current prices of near-term options. This means that VIX is the level of volaility that people are paying for in the near term. We may think of this as tending to be the more sophisticated money--maybe. VIX tracks realized volatility (actual trailing volatility of returns) very well---not perfectly, but closely. In other words VIX and real short-term volatility track each other very well---RiskMetrics has documented this extensively.