Volatility is down. Investors are getting calmer. What effect will that have on markets?
The Chicago Board Options Exchange’s Vix index, which measures the price of insuring against volatility in the S&P 500, has traded below 30 this week, for the first time since the collapse of Lehman Brothers sent it to an all-time high of 97. This brings it within the upper ranges at which it typically traded before the “Great Moderation” took over in 2003. That era of low volatility, which saw the Vix drop below 10, let financial engineering flourish, but now looks like a deviant chapter in financial history.
