Volatility Violins

March 28, 2011

(This article was first published on Milk Trader, and kindly contributed to R-bloggers)

Unlike many humans, markets love change. In fact, they look forward to it with great anticipation. Regular people like stability, for the most part. Unless you’re a career gypsy, you like to stay in one place for some time. Making a home. Settling in, as it were. Unlike markets, where volatility is the raison d’etre.

I’ve plotted the values for VIX, which is the CBOE’s volatility index calculated by some magic formula that considers 30-day expectation of price movement, in the chart below. Next to it is a plot of 30-day returns for the SPX, or a graph that plots all the percentage changes for each 30-day window. Quite frankly, I’m not sure what conclusions to draw from this, except that expectations in markets usually fall short.

The R code:


VIX <- getSymbols("^VIX", auto.assign=FALSE)[,4]
SPX <- getSymbols("^GSPC", auto.assign=FALSE)[,4]

VIX <- VIX/100
SPX <- Delt(SPX, k=30)
SPX <- na.locf(SPX, na.rm=TRUE)
SPX <- abs(SPX)

vioplot(VIX, SPX, names=c("VIX", "SPX"), col="red3")

title("Violins of Volatility")

To leave a comment for the author, please follow the link and comment on their blog: Milk Trader.

R-bloggers.com offers daily e-mail updates about R news and tutorials on topics such as: Data science, Big Data, R jobs, visualization (ggplot2, Boxplots, maps, animation), programming (RStudio, Sweave, LaTeX, SQL, Eclipse, git, hadoop, Web Scraping) statistics (regression, PCA, time series, trading) and more...

If you got this far, why not subscribe for updates from the site? Choose your flavor: e-mail, twitter, RSS, or facebook...

Tags: ,

Comments are closed.

Search R-bloggers


Never miss an update!
Subscribe to R-bloggers to receive
e-mails with the latest R posts.
(You will not see this message again.)

Click here to close (This popup will not appear again)