Volatility

Volatility is the raw material of systematic options strategies: it is what options actually price, what their sellers are paid to bear, and what their buyers pay to own. This guide collects every Knowledge Hub entry on the subject — from the mechanics of implied versus realised volatility and the VIX methodology to the structural premia (the volatility risk premium), surfaces (skew and smile), and instruments (variance swaps, dispersion) that professionals trade.

Volatility is EC Assets' core competence; these entries reflect how our Volatility & Derivatives desk thinks about the subject in production, not just in textbooks.

All entries in this guide

• Dispersion Trading — Dispersion trading sells index volatility and buys single-name volatility on the same basket, betting on…
• Implied Volatility — Implied volatility is the volatility input that, when fed into an option-pricing model, reproduces the…
• MOVE Index — Yield-curve-weighted index of one-month implied volatility on US Treasury options, the rates-market analogue…
• Realized vs Implied Volatility — Realized volatility measures how much an asset has actually moved, computed from past returns; implied…
• Rule of 16 — A trader's mental shortcut for converting annualized implied volatility into an approximate daily…
• Standard Deviation — Standard deviation measures the dispersion of a set of returns around their mean. It is the foundational…
• Variance Swap — A variance swap is a forward contract on realized variance: at maturity it pays the difference between the…
• VIX — The VIX measures the market's expected 30-day annualised volatility of the S&P 500, derived directly from…
• Volatility Risk Premium — The persistent spread between option-implied volatility and the realized volatility that subsequently…
• Volatility Skew and Smile — The empirical pattern by which implied volatility varies across strike prices for options on the same…
• VVIX — The volatility of the VIX itself. Calculated from VIX options using the same variance-swap methodology as…

More topic guides

• Options & Derivatives
• Macro & Multi-Asset
• Performance Measurement
• Risk Management
• Hedge Funds & Alternative Strategies

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