The VIX (Volatility Index): Deep Dive | Christian Kahl - Fincad

The Skeptic's Guide to Investment Management - by InvestOrama

This is a Deep Dive into The VIX (Volatility Index) and its futures

TIMESTAMPS

00:00 Introduction to Volatility

03:44 Volatility as an asset class

08:09 How the VIX is constructed

10:10 The VIX Futures

12:53 Tradeable instruments on the VIX

15:39 How to use the VIX and what type of investors is it for

QUOTES

Implied volatility levels for any typical equity for low strikes is higher than for high strikes which give you an indication of the inverse correlation [between stocks and volatility]. The inverse correlation for equity is something fundamentally inherent in principles of corporate finance.

The principle of having deeply uncorrelated assets is a fundamental proposition of modern portfolio theory. If I pick two decorrelated assets. I build an efficient frontier. And my portfolio sharpe ratio should increase. So looking for hedges, looking for ways to diversify your portfolio is something very fundamental in the principles of portfolio investment.

Trading volatility is far from straightforward. You might think you bought a call option that you bought yourself, some volatility exposure. But you might be left with very little volatility. And if this is really the starting point for over the counter products emerging, which give you outright exposure to the future implied volatility of the instrument. Like the VIX futures...

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