When the Chicago Board of Options Exchange Volatility index, or Vix, touched 80 per cent in autumn, financial markets were in for a rough ride. In its entire history (since January 1990) this indicator of volatility had never been higher. Its predecessor, based on the S&P 100, reached 150 per cent on the day of the stock market crash in October 1987 but exceeded 80 per cent for only the next seven days. Calculations from historical data show volatility in the 1929 crash reached more than 100 per cent but was as high as 80 per cent only once throughout the entire Great Depression. For much of the early 1930s, volatility hovered between 40 and 60 per cent and stayed well below 80 per cent until 1987. By any historical measure, the volatility in the autumn of 2008 was very high.

Now that the Vix is back to about 30 per cent, it feels like smooth sailing again. However, this is still high volatility relative to historical levels. Normal volatility is in the range of 15-20 per cent and during the year before the Lehman bankruptcy it was 23 per cent.