I don’t know who needs to hear this but variance is a convex function of volatility and Jensen’s inequality implies that your chart comparing spot VIX to trailing realized vol is bullshit.
-
Show this thread
-
Replying to @macrocephalopod
Yeah but the VIX is well above ATM vol rn when viewed historically so you don’t need any Jensen to know VRP has been quite high recently
1 reply 0 retweets 0 likes -
Replying to @macwonttweet @macrocephalopod
All of this can be boiled down to “VIX tends to track 1m 90% IV, not 1m 100% IV”
1 reply 0 retweets 0 likes -
Replying to @macwonttweet
No, the premium depends on the shape of the smile, and hence on implied vol of vol. it’s not a constant premium.
1 reply 0 retweets 1 like -
Replying to @macrocephalopod
Yeah 2nd point was an oversimplification for sure but find it helpful to illustrate how to think of the VIX for newbies. A good rule of thumb approximation
1 reply 0 retweets 2 likes
Loading seems to be taking a while.
Twitter may be over capacity or experiencing a momentary hiccup. Try again or visit Twitter Status for more information.