VILLANOVA UNIVERSITY

VIX and the Volatility

Smile
The Impact of Volatility on Stock and
Option Prices

MAT 5900: Quantitative Finance

Stephen Perno
Kaitlin Cherundolo

May 8, 2009

Table of Contents
Table of Contents.................................................................................................................2
Table of Figures...................................................................................................................4
Introduction..........................................................................................................................5
VIX: The Fear Index............................................................................................................5
What is the VIX?.................................................................................................................5
History of the VIX...............................................................................................................6
Calculating the VIX.............................................................................................................6
Interpreting the Numbers...................................................................................................13
Reputation as the Fear Index..........................................................................................13
Excel Graph Data: Correlative and Predictive Fit............................................................14
Extension to Other Volatility Indexes............................................................................17
The Volatility Smile..........................................................................................................17
Impact of Time to Expiry on Volatility.............................................................................24
Correlation Between % Short and Bond Rating................................................................26
Measuring the Problem......................................................................................................27
Dollar Error....................................................................................................................27
Minimax Dollar Error....................................................................................................27
Minimax Percentage Error.............................................................................................27
Pricing............................................................................................................................28
Stock Market Crash of 1987..........................................................................................28
Implied Binomial Trees.....................................................................................................28
Binomial Trees According to Black-Scholes.................................................................28
Market Behavior Tree....................................................................................................29
Uses of the Implied Binomial Tree Model....................................................................30
Conclusion.........................................................................................................................32
Bibliography......................................................................................................................34
Addendum..........................................................................................................................35

Appendix A: VIX vs. S&P 500 Calculations and Graph...............................................35

Appendix B: VIX vs. Dow Calculations and Graph......................................................50
Appendix C: VIX vs. S&P 500 Prediction Calculations and Graph..............................65
Appendix D: Volatility Smile Calculations (Maple).....................................................73
Appendix E: Maple Class Example (Empty Worksheet)..............................................85
Appendix F: Maple Class Example (Exxon Mobil)......................................................86

Table of Figures
Figure 1: At-The-Money Strike Price Table........................................................................9
Figure 2: Mid-Quote List and Left Term Calculation Table.............................................10
Figure 3: VIX vs. S&P 500Correlation.........................................................................14
Figure 4: VIX vs. S&P 500 (SPX) During LTCM and Russian Debt Crisis.....................14
Figure 5: Negative Correlation of VIX with S&P 500 (SPX)...........................................15
Figure 6: 2008-2009 VIX vs. S&P 500.............................................................................16
Figure 7: VIX Value vs. S&P 500 Value: Prediction........................................................16
Figure 8: Volatility Smile Graph.......................................................................................18
Figure 9: Microsoft Option Data.......................................................................................18
Figure 10: Microsoft Volatility Smile...............................................................................19
Figure 11: Citigroup Option Data......................................................................................19
Figure 12: Citigroup Volatility Smile................................................................................20
Figure 13: JP Morgan Option Data....................................................................................20
Figure 14: JP Morgan Volatility Smile..............................................................................20
Figure 15: General Motors Option Data............................................................................21
Figure 16: General Motors Volatility Smile......................................................................21
Figure 17: Amazon Option Data........................................................................................22
Figure 18: Amazon Volatility Smile..................................................................................22
Figure 19: Exxon Mobil Option Data................................................................................23
Figure 20: Exxon Mobil Volatility Smile..........................................................................23
Figure 21: JP Morgan Volatility Smile-- Impact of Time to Expiry.................................24
Figure 22: VOD Implied Volatility...................................................................................25

Figure 23: Percent Short/Bond Rating Correlation,..........................................................26

Figure 24: Black-Scholes Binomial Tree..........................................................................28
Figure 25: Implied Binomial Tree Example......................................................................29
Figure 26: Implied Risk-Neutral Stock Price Distribution at 5 Years...............................30
Figure 27: Lognormal Probability Distribution.................................................................30
Figure 28: (Implied-Lognormal) Probability Distribution................................................31
Figure 29: Implied Local Volatility...................................................................................32

Introduction
Volatility has played a major role in shaping the stock market behavior amongst
particular markets like the S&P 500, the Nasdaq, and others. Calculating the implied
volatility used to be done solely using the Black-Scholes method. The VIX, a ticker
symbol for the Chicago Boards of Option Exchange Volatility Index, and the volatility
smile, a characteristic of implied volatility plots in which out-of-the-money options
exhibit higher volatilities than at-the-money options, they both go against the Black
Scholes model to create the formula or method to measure the quantity or estimate the
behavior. This paper will intend on investigating those methodologies, by calculating the
VIX value step by step and studying the factors that affect the implied volatility in the
market today and how to account for that through modeling, and embarking on new
territory on volatility smiles and their relationship to other financial concepts like the
percent short and bond rating of a company.

VIX: The Fear Index

What is the VIX?
VIX is the ticker symbol for the Chicago Board Options Exchange Volatility Index. It is
a popular measure of the implied volatility of S&P 500 index options. It also measures
market expectations of near term volatility (30 days) conveyed by stock index option
prices. More specifically, the VIX can be a measure of the expected movement in the
S&P 500 index over a 30-day period, on an annualized basis. It is speculated that a high
value corresponds to a more volatile market and therefore more costly options. These
more costly options come from investors that charge a higher premium to insure against
someone investing in a big change in the index price to make a maximal profit with
minimal effort.

History of the VIX

The VIX ticker, which was incepted in 1990, used to measure the regular volatility of
market indexes, specifically the S&P 100. It began as a value based on the S&P 100
Index option prices and it extracted implied volatilities from option-pricing models like
Black & Scholes and others.
In 1993, the VIX index was introduced to the general public on a grand scale and
popularized by Professor Robert E. Whaley of Duke University who wrote countless
papers on the VIX and the potential of the VIX as a volatility index.
Not much changed in the VIX until 10 years later, when in 2003, the underlying index
changed from the S&P 100 to the S&P 500. The original VIX that measured the S&P
100 Index option prices became the VXO ticker symbol. Also, in 2003, more robust
methodology to compute the VIX value improved estimates such that the expected
volatility from option prices in a wide range of strike prices could be computed, not just
at at-the-money strikes as in the original VIX.
After 2003, the VIX and its popularity took off. On March 26, 2004, the first-ever
trading in VIX futures on the CBOE Futures Exchange (CFE) took place. Now people
could estimate the value of the VIX and put a money stake in their estimations. VIX
options were then launched in February 2006 where people could bet on the movement of
the VIX.
Some of the statistical data1 on the VIX from its inception in 1990 are shocking. On
10/24/2008, the VIX reached an intraday high of 89.53. This very, very high number
reflects the recent economical turmoil that has pervaded the S&P 500 and other market
indexes. The lowest recorded value of the VIX between 1990 and 2008 occurred on
12/24/1993 when it fell to 9.48. This marked a time when the S&P 500 was more stable.
Between 1990 and October 2008, the average value of the VIX was 19.04.

Calculating the VIX2

The old VIX was calculated using the Black Scholes pricing model. The new VIX uses a
formula, developed from discussions on volatility and variance swaps which became
available in the early 2000s. The formula is used to derive the expected volatility by
averaging the weighted prices of non-zero out-of-the-money puts and calls. This
particular formula is independent of any model and gives more flexibility and generality
to the VIX value. The updated formula for the VIX value is as follows:
K
1F

2
= 2i e RT Q( K i )
1
T i Ki
T K0

"VIX." Wikipedia, the free encyclopedia. 26 Feb. 2009. <http://en.wikipedia.org/wiki/VIX>.

THE CBOE VOLATILITY INDEX VIX. CBOE Home. Chicago Board of Options Exchange. 22
Mar. 2009 <http://www.cboe.com/micro/vix/vixwhite.pdf>.
2

where = VIX/100 and therefore VIX = 100*, and T is the maturity of the options. The
options can either be near-term options or next-term options. The difference between
them is that [n]ear-term options must have at least one week to expiration; a
requirement intended to minimize pricing anomalies that might occur close to expiration.
When the near-term options have less than a week to expiration, VIX rolls to the
second and third [] contract months.3 Going back to the formula, F is the forward
index level from the index prices or the spot (current) price of the index in question. Ki is
the strike price of i-th out-of-the-money option; it is a call if Ki > F and a put if Ki < F.
Ki is the interval between the strike prices calculated by halving the difference of the
two strikes surrounding Ki as shown here:
K i =

K i +1 K i 1
2

K0, in particular, is the first strike below the spot price F. R is the risk-free interest rate
and Q(Ki) is the mid-quote price for each out-of-the-money option with strike Ki, whether
it is for a call or a put.
There are two components to every option (call, put, etc.), the bid and ask prices. To
retrieve a certain overall price for an option, the mid-quote price, and an average of the
bid and ask prices must be done. The mid quote price of an option depends on the
location of the strike with respect to K0. Out-of-the-money puts come from strikes that
are less than K0 while out-of-the-money calls come from strikes that are greater than K0.
The mid-quote price for the puts is the put price, calculated from the bid price and the ask
price and the mid-quote price for the calls is the call price, also calculated from the bid
and ask price. For the strike K0 the mid quote price is the average of the call and put
prices both calculated from the bid and ask prices.
For example, consider a strike K0 of $920. Since K0 is the strike closest to the spot price
F, one must consider the bid and ask prices for both the call option and for the put option.
With that in mind, compute the mid-quote price for the call where the bid price is $35.20
and the ask price is $39.10.

mid quote call =

35 .20 + 39 .10
= 37 .15
2

Now, compute the mid-quote price for the put option where the bid price is $35.20 and
the ask price $38.10.
mid quote

put

35 .20 + 38 .10
= 36 .65
2

Finally, to get the mid-quote price for K0, one must compute the average of the mid-quote
call and the mid-quote put prices.
3

Ibid.

mid quote K 0 =

37 .15 + 36 .65
= 36 .90
2

Further, consider any out-of-the-money option, say a put, with a strike price K = $915
where the bid price is $30.80 and the ask price is $36.30. The mid quote price for that
particular strike would only be
mid quote

putonly

30 .80 + 36 .30
= 33 .55
2

Now that the ingredients and preliminary explanations have been formulated, the
procedure to find the VIX value can begin. The VIX calculation will first need two
options with different maturities, one near-term and the other next-term. Starting with
options that have maturities 9 days and 37 days, assume that the options begin at
8:30AM Chicago time. The time of settlement for these options is assumed to be also
8:30AM Chicago time. In order to have accurate calculations, the time to maturity must
be converted to minutes per year. The new maturity T will then be
T = {MCurrent Day + MOther days + MSettlement Day} / Minutes in a year
where
MCurrent Day = # of minutes from start until midnight of the current day
MOther Days = # of minutes of days in between the current days and the settlement day
MSettlement Day = # of minutes from midnight until settlement time on the last day
Given the initial time is 8:30AM, T1 and T2 for the respective options are:
T1 = {(15.5 hrs*60 mins) + (8 days*24 hrs*60 mins) + (8.5 hrs*60 mins)} / (365 days*24
hrs*60 mins)
T1 = {930 + 11,520 + 510) / 525,600 = 0.0246575
T2 = {(15.5 hrs*60 mins) + (36 days*24 hrs*60 mins) + (8.5 hrs*60 mins)} / (365
days*24 hrs*60 mins)
T2 = {930 + 51,840 + 510) / 525,600 = 0.1013699
Assume R to be 0.38% for both options in this example. The riskless interest rate R is
retrieved by the bond-equivalent yield of the U.S. T-bill maturing closest to the [option]
expiration dates.4 So, the VIX calculation may use different riskless interest rates for
near- and next-term options.
The selected options for the calculation of the spot price F, are out-of-the-money calls
and puts centered around an at-the-money strike, K0. The at-the-money strike price can
be found by finding the strike price where the difference between the call and put prices
is the smallest. From the table below, the at-the-money strike price is 920.

THE CBOE VOLATILITY INDEX VIX.

Figure 1: At-The-Money Strike Price Table5

NOTE: The dots in the various blocks means that values have been omitted to save space. Please see
http://www.cboe.com/micro/vix/vixwhite.pdf for full tables.

Just to check that the strike price that was chosen was the right choice, one can calculate
the spot prices for both the near- and next-term options. Listed below they are:
F = Strike Price + eRT (Call Price Put Price)
F1 = 920 + e 0.0038 0.0246575) (37.15 36.65) = 920.50005
F2 = 920 + e(0.0038 0.1013699) (61.55 60.55) = 921.00039
(

K0 should be the strike price that is immediately below the spot prices so 920 is indeed
the strike price K0.
Next, choose out-of-the-money put options with strike prices less than K0. Start with the
put strike directly below K0 and move to consecutively lower strike prices. The
constraints throughout this process include omitting puts with a zero bid price and that
the collection of put options will cease when two puts with consecutive strike prices that
are zero are seen. Once those options are collected, follow the same procedure with the
call options with the same constraints. With the options that were collected, calculate the
mid-quote price as detailed above. For the strike price 920, K0, average the mid-quote
prices for both the call and the put option at strike to get the mid-quote price for 920.
Next, bring in the full formula and begin to compute values for individual terms in the
formula. Take the left hand side of our formula:

2 K i RT
2 e Q( K i )

T i Ki

Ibid.

Ki, as explained above, is the interval between the strike prices. Middle values of this
interval can be calculated by taking the difference of the strikes surrounding Ki and
dividing it by 2. The upper end strike and the lower end strike intervals can be calculated
simply by subtracting the end strike with the adjacent strike. For example if the listing of
put strikes were the following: 350, 355, 360, 365, 370, and 375, the interval for one of
the middle values, like 365, would be
K 365 Put =

370 360 10
=
=5
2
2

and for one of the end values like 350, the calculation for K350 Put would be
K 350 Put = 355 350 = 5

The interval is the same for this particular example set but each case is shown so to find
the interval at different locations in the strike distribution.
Knowing about the strike interval one can now begin to calculate values for the left term
of the VIX formula. For the near-term put at strike 400, the left term of the formula
would come out to be the following:

Each contribution from all the out-of-the-money puts and calls is then summed and
multiplied by 2/T1 for near-term options and 2/T2 for next-term options. A table of some
of these particular values and the subsequent end value is shown below.
Figure 2: Mid-Quote List and Left Term Calculation Table6

Ibid.

NOTE: The dots in the various blocks means that values have been omitted to save space. Please see
http://www.cboe.com/micro/vix/vixwhite.pdf for full tables.

So the near-term total contribution of the strikes is 0.4727799 and the next-term total
contribution is 0.3668297.
For the right term of the VIX formula, directly plug in the variables to get the right term
values for both near- and next-term options.

With both the left hand term and the right hand term of the formula calculated, the
variance 2 for both types of options can finally be calculated.

In order to get the solitary volatility , take the square root of the variance. But before
that happens, compute the 30-day weighted average of the near-term and the next-term
options so to get one value to take the square root of. There are some things that need to
be considered when thinking about weighted averages. Firstly, if the near-term maturity
of one option is less than 30 days and the next-term maturity for the other option is
greater than 30 days, then the VIX calculation reflects an interpolation wherein each
individual option weight is less than or equal to 1 and the sum of the weights equal to 1.
Conversely, if both the near-term and the next-term options are greater than 30 days, then
the VIX calculation reflects an extrapolation wherein the sum of the option weights is
still equal to 1, but the near-term option weight is greater than 1, and the next-term option
weight is less than 0.
In this particular problem, the weighted average calculation calls for an interpolation.
The VIX value with the appropriate interpolation term under the radical is shown below

Where:
NT1 = # of minutes to settlement of the near-term options (12,960)
NT2 = # of minutes to settlement of the next-term options (53,280)
N30 = # of minutes in 30 days (30 1,440 = 43,200)
N365 = # of minutes in a 365-day year (365 1,440 = 525,600)
The equation with the values plugged in look like the following:

The specific weights that come into play with the different variances intend on narrowing
the disparity between the two variances. With T2 closer to 30 days at 37 days, its
contribution to the interpolation will be less than the contribution from T1 which is 9
days. Once the interpolated variances are found between the near-term and the next-term
options, one can take the square root of that value and multiply by 100 to get a final VIX
value of 61.22.

Interpreting the Numbers

If the VIX value is 61.22, what exactly does that mean for the investor or speculators?
Quantitatively, a VIX value of 61.22 represents an expected annualized change of
[61.22%] over the next 30 days; thus one can infer that the index option markets expect
61 .22 %

= 17 .67 % over the next 30-day period.7

the S&P 500 to move up or down
12 months

As far as the index option prices, this means that the options were priced with about a
68% chance that the S&P 500s 30-day return will be above or below 17.67%.
Qualitatively, it means the depending on the number of the VIX, the more unstable the
S&P 500. Listed below is the subjective distribution of stability given particular values
of the VIX:

VIX anxiety levels:8

5-10 = extremely low anxiety = extreme complacency

10-15 = very low anxiety = high complacency
15-20 = low anxiety = moderate complacency
20-25 = moderate anxiety = low complacency
25-30 = moderately high anxiety
30-35 = high anxiety
35-40 = very high anxiety
40-45 = extremely high anxiety
45-50 = near panic
50-55 = moderate panic
55-60 = panic
60-65 = intense panic
65+ = extreme panic

A good comfortable range to be in is between 18 and 27. That means that the economy is
stable and peoples feelings about the market are mainly complacent.

Reputation as the Fear Index

Computing these values and finding their implications as far the movement of the stock
market in a 30 day time span is both enlightening for some investors but more often than
not, it strikes fear into investors hearts. Investors believe that a higher value of VIX
translates into a greater degree of market uncertainty while a low value is consistent with
greater stability. When investors anticipate a large upside volatility, they are unwilling to
sell upside call stock options unless they receive a high premium. The higher premium
is wanted because the writer of the option wants to charge more for an option that
potentially has great growth in a highly changing market. The same situation occurs for
7

"Volatility smile." Wikipedia, the free encyclopedia. 15 Apr. 2009

<http://en.wikipedia.org/wiki/Volatility_smile>.
8
Krupansky, Jack. "VIX - CBOE Volatility Index." Finaxyz. 30 Jan. 2006. 5 May 2009
<http://www.finaxyz.com/vix.htm>.

put options but with opposite trends. For a large downside volatility, a writer for a put
option will want to raise his price because of the high risk for drastic movement.

Excel Graph Data: Correlative and Predictive Fit

How exactly does all this interpretive data fit with actual data of stock indexes? A graph
was tabulated showing the performance of the VIX, both old and new, imposed with the
S&P 500 index prices from 1990 through to 2003.
Figure 3: VIX vs. S&P 500Correlation9

In it, multiple dates exhibit a negative correlation between the S&P 500 index price and
the VIX value. Some good examples include the beginning and the end of 1998,
September 11, 2001, and the dot-com crisis of 2002. The end of 1998 signified the crises
of Russian debt and the problems that arose with Long Term Capital Management. It
was during this time, among other times, that there was a high negative correlation
between the VIX values and the S&P 500 index prices. The table below shows the
disparity between the S&P 500 and the VIX between August 3, 1998 and the end of
November, 1998 when the Russian debt and the LTCM crisis was going on.
Figure 4: VIX vs. S&P 500 (SPX) During LTCM and Russian Debt Crisis10

THE CBOE VOLATILITY INDEX VIX. CBOE Home. Chicago Board of Options Exchange. 22
Mar. 2009 <http://www.cboe.com/micro/vix/vixwhite.pdf>. (NOTE: Graphs were on an older version of
this page and have been eliminated in the update)
10
THE CBOE VOLATILITY INDEX VIX. (NOTE: Graphs were on an older version of this page and
have been eliminated in the update)

How much does this correlation extend for the 13 year period? In this next plot below,
see that the slope of the VIX values have a negative slope when comparing the daily VIX
changes and the daily index changes.
Figure 5: Negative Correlation of VIX with S&P 500 (SPX)11

11

Ibid. (NOTE: Graphs were on an older version of this page and have been eliminated in the update)

The data seem very suggestive to the VIX having a negative correlation with stock prices.
Does the same relationship hold for todays stock behavior? Indeed it does. Below is an
Excel plot of the VIX vs. the S&P 500 for the time period of 2008-2009.
Figure 6: 2008-2009 VIX vs. S&P 500

0.3
On a number of occasions, specifically the time around October 10 and November 24, the
VIX movement and the S&P 500 movement are opposites of each other.
It has been thoroughly established that the VIX correlates negatively with the index
options, but does it offer predictions for market movement? If it is, then investors would
know when significant changes would be happen so that they can either make profit in
option investments or hedge against bigger risks of loss. However, the evidence that has
been explored does not show any predictive qualities. In fact, a lot of the previous
assessments show that the VIX value change is a response to Index changes rather than a
prediction of the Index changes. The Excel plot below shows this evidencesee the
points below marked with *. The VIX value spikes a day or two after the S&P 500 index
drops.

0.2

Figure 7: VIX Value vs. S&P 500 Value: Prediction

So it turns out that this fear index, as investors call it, does not have any predictive
qualities. It does correlate well with Index prices but, as far as one can tell, it does not
provide any predictive evidence for market behavior.
Other critiques of the VIX value extend further than the predictive value. VIX measures
index option volatility over a 30-day interval. However, equity options have 2-6 month
maturities. There is no way to weigh that length of maturity into a 30-day VIX value
without having a gross amount of error. Also, volatility is usually high in technology
stocks and low in utility stocks. So the VIX may be too simplistic to estimate for all
types of stocks. Granted the VIX is supposed to measure the volatility in the S&P 500
market index in general, but the influence of the volatility on particular industries can
skew the VIX value.

Extension to Other Volatility Indexes

Not only can this analysis be done for the VIX, there are other volatility indexes that have
come about the in the recent that serve to measure the movement of various markets.
Other volatility indexes include the Nasdaq-100 Volatility Index, the DJIA Volatility
Index, the Russell 2000 Volatility Index, the S&P 500 3-Month Volatility Index, and
volatility indexes on commodities and foreign currencies like crude oil, gold, and
EuroCurrency.

The Volatility Smile

The Volatility Smile is the phenomenon where, when the Black-Scholes implied
volatility is calculated using option prices based on the current market, the volatility of
in-the-money options and out-of-the-money options tends to be higher than at-the-money
options. When strike price is plotted against implied volatility, the graph looks something
like:
Figure 8: Volatility Smile Graph12

The Volatility Smile results from the probability of extreme moves. The greater the
difference of the strike price (K) from the initial stock price (S0) the higher the implied
volatility of the option.
Traders use the Black-Scholes pricing method to find the price of a put or call option.
When the options are priced using this method, they are priced with a consistent implied
volatility. That is, for options with the same underlying stock and time to expiry, but
different K, Black-Scholes assumes a constant . However, using data from actual stock
prices, it can be found that the volatility of the options is not consistent.
Using option data from April 16, 200913, the Black-Scholes function in Maple was used
to calculate the implied volatility of options with varied strike prices for six different
companies: Microsoft, Citigroup, JP Morgan, General Motors, Amazon and Exxon
Mobil. In these representations, it is important to note that plot of the volatility against
the strike price for the company does not always reflect a smile curve like the one in
Figure 8. There are two possible causes for this: 1) the option prices on
finance.yahoo.com are out of date and 2) not all companies trade in a strike price range
wide enough to reflect the entirety of the smile.
Figure 9: Microsoft Option Data14

12

"Volatility smile." Wikipedia, the free encyclopedia. 15 Apr. 2009

<http://en.wikipedia.org/wiki/Volatility_smile>.
13
Data from finance.yahoo.com.
14
Data from finance.yahoo.com

Microsoft
Stock Price
Date of Expiry
RisklessIntrest Rate

16-Apr-09
$19.76
16-Oct-09
-0.029

Strike Price
$10.00
$13.00
$18.00
$21.00
$24.00
$30.00

Call Option Price

$9.80
$7.01
$3.15
$1.83
$0.83
$0.12

Figure 10: Microsoft Volatility Smile

Note that the Microsoft stock price at the time the graph was generated was $19.76. This
curve reflects the left hand side of the smile.
Figure 11: Citigroup Option Data15
Citigroup
Stock Price
Date of Expiry
Riskless Intrest Rate

15

Data from finance.yahoo.com

16-Apr-09
$4.01
18-Sep-09
-0.335

Strike Price
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
$10.00
$15.00

Call Option Price

$0.98
$0.75
$0.58
$0.50
$0.38
$0.32
$0.23
$0.13

Volatility
1.1584
1.20201
1.22284
1.28384
1.26572
1.28768
1.24566
1.34701

Figure 12: Citigroup Volatility Smile

The price of Citigroup stock at the time the graph was generated was $4.01. Note that this
graph is unique (out of the ones studied) because it reflects the right side of the smile as
opposed to the left. It is believed this happened because of how low Citigroups stock is
that there are not any options with a strike price below the underlying.
Figure 13: JP Morgan Option Data16
JP Morgan
Stock Price
Date of Expiry
Riskless Intrest Rate

16-Apr-09
$33.24
18-Sep-09
-0.014

Figure 14: JP Morgan Volatility Smile

16

Ibid.

Strike Price
$7.50
$17.00
$23.00
$27.00
$30.00
$35.00
$40.00
$45.00
$50.00
$55.00
$60.00
$65.00

Call Option Price

$25.90
$16.80
$12.40
$9.90
$7.60
$4.89
$2.99
$1.66
$0.80
$0.62
$0.33
$0.19

Volatility
1.31616
0.83719
0.85417
0.83692
0.73562
0.66598
0.62278
0.58113
0.53802
0.57696
0.56012
0.55616

JP Morgan has more call options available for trading, resulting in a wider range of strike
prices. Because of the more pronounced smile, it is believed that the option data for JP
Morgan was also more up-to-date when the graph was generated.
Figure 15: General Motors Option Data17
General Motors
Stock Price
Date of Expiry
Riskless Intrest Rate

16-Apr-09
$1.94
18-Sep-09
-0.755

Figure 16: General Motors Volatility Smile

17

Data from finance.yahoo.com.

Strike Price
$1.00
$2.00
$3.00
$4.00
$5.00

Call Option Price

$0.92
$0.54
$0.33
$0.21
$0.16

Volatility
1.45429
1.54094
1.51958
1.49524
1.53495

General Motors has a very low underlying stock price of $1.94 and only five different
strike prices available for trade. However, the implied volatilities of these options are
more consistent than those of other companies. Something that is important to note,
however, is that the volatility is consistently very highapproximately 1.5.
Figure 17: Amazon Option Data18
Amazon
Stock Price
Date of Expiry
Riskless Intrest Rate

16-Apr-09
$77.25
16-Oct-09
-0.017

Figure 18: Amazon Volatility Smile

18

Data from finance.yahoo.com.

Strike Price
$40.00
$45.00
$50.00
$55.00
$60.00
$70.00
$80.00
$85.00
$90.00
$95.00
$100.00
$120.00

Call Option Price

$37.35
$33.05
$28.80
$25.50
$21.45
$16.32
$11.40
$9.15
$7.15
$5.90
$4.40
$1.49

Volatility
0.55971
0.59459
0.58462
0.62443
0.58119
0.61589
0.59057
0.56818
0.54467
0.54457
0.52042
0.48745

The plot of Amazons implied volatilities exhibits some of the characteristics of the
volatility smiles, but it seems that the option prices for 40 K 70 is outdated because
the graph is inconsistent.
Figure 19: Exxon Mobil Option Data19
Exxon Mobil
Stock Price
Date of Expiry
Riskless Intrest Rate

22-Apr-09
$64.75
16-May-09
-0.077

Strike Price
$50.00
$55.00
$60.00
$65.00
$70.00
$75.00
$80.00

Call Option Price

$14.85
$10.10
$5.40
$1.99
$0.47
$0.10
$0.05

Figure 20: Exxon Mobil Volatility Smile

19

Exxon Mobil calculation suggested by Richard Hurst. 22 April 2009. Data from finance.yahoo.com.

Volatility
0.68934
0.56726
0.40197
0.33733
0.32083
0.33593
0.39957

The Exxon Mobil volatility smile is an almost perfect example of the theoretical smile
shown in Figure 8. This is most likely attributed to the high volume of trading on Exxon
Mobil options as well as the moderate impact of the economy on the oil industry.

Impact of Time to Expiry on Volatility

In addition to strike price, time to expiry affects the volatility smile. In Figure 21, the red
line represents the volatility of JP Morgan call options that expire on May 15, 2009, the
blue line represents the volatilities of options that expire on June 19, 2009, and the green
line represents the volatilities of the options that expire on September 18, 2009. The
volatility smile with the greatest volatility and the steepest slope is the one that is the
closest to expiry.
Figure 21: JP Morgan Volatility Smile-- Impact of Time to Expiry

In the example of the impact of time to expiry below, as in the first example, the
downward slope of the implied volatilities is greater with a shorter time to expiry. In this
example, the range of strike prices is wide enough to show the full volatility smile, so you
can see that the options with the least time to expiry also have a steeper upwards slope.
Figure 22: VOD Implied Volatility20

20

Dermen, Emanuel. "Laughter in the Dark-- The Problem of the Volatility Smile." 26 May 2003. 17 Apr.
2009, 4.

Correlation Between % Short and Bond Rating

There appears to be a correlation between the bond rating for a company, and the % short
value, which gives a perception percentage that people believe the companys stock price
will drop. Good companies will have good bond ratings and low percent shorts and vise
versa.
Figure 23: Percent Short/Bond Rating Correlation21,22
Company

Ticker Symbol

% Short

Amazon
Citigroup
General Motors
JP Morgan

AMZN
C
GM
JPM

NA
17.10%
1.90%

Microsoft

MSFT

1.30%

8.00%

Bond Rating

Average Default Rate

Baa2
A3
Ca
Aa3
Aaa

Its connection to the volatility smile is not exactly clear. The hypothesis was that, the
Exxon Mobil
XOM
0.70% Aaa
more shallow the smile, the better the company performed both in % short value and in
its bond rating. It turns out that for the limited number of companies with a somewhat
limited amount of strikes to evaluate per company, it seems as though the company with
the steeper smile ends up having a better performance report on the other quantities. The
reason there could be 2 reasons: 1) The bond ratings take a long time to evaluate, so
21
22

Percent Short Information from finance.yahoo.com

Bond Rating information from moodys.com

0.15%
0.02%
24.73%
0.01%
0.00%
0.00%

some long term ratings may either be out of date (though it is a good rating, Exxon
Mobils long term rating is Aaa as of June 6, 1995) and 2) Though the smile may be
steep, the volatility that it is approaching may not be as high as some companies with less
pronounced smiles or odd plots overall.
As far as is known for now, there can be no definitive correlation between the volatility
smile, the % short value, and the bond rating. More data needs to be collected
hopefully more accurate data to make a better assessment of this hypothesized
relationship.

Measuring the Problem

Mark Rubenstein proposed two methods of measuring the difference between the BlackScholes price and the market price: dollar error and minimax dollar error. Dollar error is
used to calculate minimax dollar error. Rubenstein then used the minimax dollar error to
calculate the effectiveness of Black-Scholes.

Dollar Error23
To calculate dollar error, first select two options with the same underlying stock price, the
same time to expiry, and different strike prices. For a given volatility, calculate the
Black-Scholes price of each option.
Dollar error=|market BS price|
Record the maximum difference of the dollar errors from either option 1 or option 2.
Repeat this process, altering assumed volatility each time so that the volatilities
eventually range from 0 to by an interval of your choosing.

Minimax Dollar Error24

Using the set of maximum dollar errors given by calculating dollar error over the range 0
to for option 1 and option 2, the minimax dollar error (MDE) is the minimum of the set
of maximums. The MDE for the two options will be such that:
Implied [op1] < [MDE] < implied [op2]
and
dollar error[op1] = dollar error[op2]

Minimax Percentage Error25

The minimax percentage errors are the percentage errors that occur at the volatility that
equalizes the absolute values of the ratio of the [minimax] dollar error divided by the

23

Rubenstein, Mark. "Implied Binomial Trees." Haas School of Business, University of California
Berkeley - MBA, MFE, PhD, and Undergraduate Programs. 15 Apr. 2009
24
Ibid.
25
Rubenstein, Mark..

corresponding option price.26 Symbolically, this means if DE is the dollar error, that at a
particular volatility :
DE [op 1]
DE [op 2]
=
price [op 1]
price [op 2]

Pricing27
In order to put a price on the MDE, Rubenstein proposed a scaled version of the MDE in
which:
Scaled MDE=(MDE*100)/concurrent underlying
This formula accounts for the difference in the original underlying stock prices. It would
seem that the higher the stock price, the greater the MDE.

Stock Market Crash of 198728

In 1986, the worst case scenario compared calls that were 9% in-the-money with calls
that were 9% out-of-the-money. The percentage error was less than 1% and the scaled
MDE was $0.04. For the market index that was approximately $225, the unscaled error
was $0.10. So, if the Black-Scholes formula was correct, this meant that the average error
was $0.10. As the stock market fell in 1987, the MDE percent error approximately
doubled and by 1992, it had increased from 1% to 6.5%. Because of the drastic increase
in the error after the crash of 1987, it became necessary to find a way to model the
difference between the market prices and the Black-Scholes prices.

Implied Binomial Trees

Binomial Trees According to Black-Scholes
Black-Scholes assumes a uniform volatility of options with the same underlying stock
price, the same time to expiry and different strike prices. The binomial tree that uses the
Black-Scholes pricing model looks like the picture in Figure 21, all of the nodes are of an
equal probability and equally spaced.
Figure 24: Black-Scholes Binomial Tree29

26

Ibid.
Ibid.
28
Ibid.
29
Dermen, Emanuel, and Iraj Kani. "The Volatility Smile and Its Implied Tree." Jan. 1994. 15 Apr.
2009, 6.
27

Market Behavior Tree

However, as seen in the volatility smiles from different companies, the volatility of
options with the same underlying and time to expiry but different strike prices is
different. Thus, multiple sources have proposed an implied binomial tree that is unique
according to the market prices. The Black-Scholes tree is now skewed toward lower
index prices. As puts travels more and more out-of-the-money, the implied volatility
increases, hence augmenting the change of the index price at this range of the index.
That is why the spacing in the implied tree is skewed to lower index prices. There is a
larger chance that prices will drop at a larger rate which corresponds to market behavior.
Implied trees can also be used to calculate both the distribution and volatility of the
index at future times and market levels, as implied by option prices.30
Figure 25: Implied Binomial Tree Example31

30

Dermen, Emanuel, and Iraj Kani..

Dermen, Emanuel. "Laughter in the Dark-- The Problem of the Volatility Smile." 26 May 2003. 17 Apr.
2009, 3.
31

Uses of the Implied Binomial Tree Model32

Once you have the model to construct an implied tree, of which takes an innumerable
amount of time to comprehend and reproduce, you can look at distributions of future
stock prices. All of the following distributions are from an implied 5-yr tree with 500
levels to the following smile:
For all T, at-the-money (K=100) implied =10%
increases/decreases by 1% point for every corresponding 10% drop/rise
in the strike price
Assume r=3% compounded continuously
Figure 26: Implied Risk-Neutral Stock Price Distribution at 5 Years33

The mean stock price for the above distribution is $116.18 with a standard deviation of
21.80%. This distribution reflects the implied tree distribution where the implied
volatility is skewed toward the lower index prices like those less than $100.
Figure 27: Lognormal Probability Distribution34

32

Dermen, Emanuel, and Iraj Kani. "The Volatility Smile and Its Implied Tree." Jan. 1994. 15 Apr. 2009,
14.
33
Ibid.
34
Dermen, Emanuel, and Iraj Kani. "The Volatility Smile and Its Implied Tree." Jan. 1994. 15 Apr. 2009,
14.

This distribution has the same mean stock price and standard deviation as the implied
probability distribution, but this particular plot reflects what should be happening in the
Black Schole model, where the random walk of index prices takes place.
Figure 28: (Implied-Lognormal) Probability Distribution35

35

Dermen, Emanuel, and Iraj Kani. "The Volatility Smile and Its Implied Tree." Jan. 1994. 15 Apr. 2009,
14.

This is the difference between the two previous distributions. The most important set of
data to consider is the first set of positive bars show how the implied tree skews its
volatility values to lower index prices.
Figure 29: Implied Local Volatility36

The three-dimensional image above plots the index vs. volatility vs. time. In the Black
Scholes pricing model, this would be a flat plane. Using the implied market behavior tree,
it is a surface where the implied volatility is higher at a lower index and at a shorter time
to expiry. Not only can these distributions be plotted for smiles that are independent of
expiration time, but one can compute distributions where expiration time is significant,
such as European options as well as more exotic options at different expiration times.

Conclusion
The VIX, its history, a walkthrough of a detailed example of how to calculate the value of
the VIX, and the interpretation of the data gathered over the years on the VIX has been
presented here. The VIX is certainly negatively correlated to the S&P 500 market index
but it does not serve to predict the movement of the market. It must be remembered that
the VIX value was intended to measure the implied volatility of the S&P 500 index. Any
subjective speculations about its affect on the market or how it reacts to the markets
cannot be fully confirmed with this current analysis. Also, as more is learned about the
volatility smile phenomenon, scientists and economists continually work with modeling
the volatility smile and to effectively price options that accurately reflect market
behavior. The two main areas of study are the implied binomial tree, as shown above, and
stochastic models using differential equations. All in all, the VIX and the volatility smile
36

Ibid.

are both ways for economists to study the behavior of the market and discover how they
can potentially predict, if at all possible, the movement of the market. Only time will tell
the wondrous discoveries that will be made about the seemingly random movements of
volatility and the stock market.

Bibliography
Bringo, Damiano. "Volatility-Smile Modeling with Density-Mixture Stochastic
Differential Equations." 18 Dec. 2002. 15 Apr. 2009.
Dermen, Emanuel, and Iraj Kani. "The Volatility Smile and Its Implied Tree." Jan.
1994. 15 Apr. 2009 <http://www.ederman.com/new/docs/gs
volatility_smile.pdf>.
Dermen, Emanuel. "Laughter in the Dark-- The Problem of the Volatility Smile." 26
May 2003. 17 Apr. 2009.
Krupansky, Jack. "VIX - CBOE Volatility Index." Finaxyz. 30 Jan. 2006. 5 May 2009
<http://www.finaxyz.com/vix.htm>.
Moodys.com. 21 Apr. 2009 <http://www.moodys.com>.
Poon, Ser-Huang. "Volatility Smile and Skew." 28 Sept. 2008. 17 Apr. 2009.
Rubenstein, Mark. "Implied Binomial Trees." Haas School of Business,
University of California Berkeley - MBA, MFE, PhD, and Undergraduate
Programs. 15 Apr. 2009
<http://www.haas.berkeley.edu/groups/finance/WP/rpf232.pdf>.
THE CBOE VOLATILITY INDEX VIX. CBOE Home. Chicago Board of
Options Exchange. 22 Mar. 2009
<http://www.cboe.com/micro/vix/vixwhite.pdf>.
"VIX." Wikipedia, the free encyclopedia. 22 Mar. 2009
<http://en.wikipedia.org/wiki/VIX>.
"Volatility Skew." Optionistics. 15 Apr. 2009
<http://www.optionistics.com/i/volatility_skew>.
"Volatility smile." Wikipedia, the free encyclopedia. 15 Apr. 2009
<http://en.wikipedia.org/wiki/Volatility_smile>.

Addendum
Appendix A: VIX vs. S&P 500 Calculations and Graph
Date

Adj
Close

VIX

2/26/200
9

44.66

2/25/200
9

44.67

2/24/200
9

45.49

0.00022
39
0.01819
04
0.14560
38

2/23/200
9

52.62

Date

Adj
Close

2/26/200
9

752.8
3

2/25/200
9

764.9

2/24/200
9

773.1
4

0.06517
22

2/23/200
9

743.3
3

2/20/200
9

770.0
5

2/19/200
9

778.9
4

2/18/200
9

788.4
2

S&P500
0.0159056
68
0.0107150
38

2/20/200
9

49.3

2/19/200
9

47.08

2/18/200
9

48.46

0.04607
58
0.02889
04
0.00411
86

2/17/200
9

48.66

0.12528
65

2/17/200
9

789.1
7

2/13/200
9

42.93

0.03991
98
0.07651
2
0.04693
84

2/13/200
9

826.8
4

0.0393200
53
0.0353153
56
0.0114785
73
0.0120969
22
0.0009508
17
0.0466294
46
0.0100480
38

2/12/200
9

835.1
9

0.0017376
41

2/11/200
9

833.7
4

0.06712
74
0.00620
62
0.00826
64
0.00274

2/10/200
9

827.1
6
869.8
9

0.0079234
56
0.0503686
2
0.0014840
47

868.6
845.8
5

0.0265406
81
0.0162331
94

2/12/200
9

41.25

2/11/200
9

44.53

2/10/200
9

46.67

2/9/2009

43.64

2/6/2009
2/5/2009

43.37
43.73

2/9/2009
2/6/2009
2/5/2009

04
2/4/2009

43.85

2/3/2009

43.06

0.01818
02
0.05555
73

2/2/2009

45.52

1/30/200
9

44.84

1/29/200
9

42.63

1/28/200
9

39.66

1/27/200
9

42.25

1/26/200
9

45.69

1/23/200
9

47.27

1/22/200
9

47.29

1/21/200
9

46.42

1/20/200
9

56.65

1/16/200
9
1/15/200
9
1/14/200
9
1/13/200
9
1/12/200
9

46.11
51
49.14
43.27
45.84

0.0075176
62

2/4/2009

832.2
3

2/3/2009

838.5
1

0.01505
12

2/2/2009

825.4
4

0.05054
24

1/30/200
9

825.8
8

0.07221
51
0.06326
12
0.07827
51
0.03399
64
0.00042
3

1/29/200
9

845.1
4

0.0157099
3
0.0005329
07
0.0230528
1
0.0336810
51

1/28/200
9

874.0
9

0.0330068
34

1/27/200
9

845.7
1

0.0108663
12

1/26/200
9

836.5
7

0.0055378
56

1/23/200
9

831.9
5

0.01856
85
0.19916
16

1/22/200
9

827.5

0.0053632
36
0.0152784
58

1/21/200
9

840.2
4

0.20586
21
0.10079
58
0.03715
23

1/20/200
9

805.2
2

1/16/200
9
1/15/200
9

850.1
2
843.7
4

0.12721
38
0.05769
75
0.06815
18

1/14/200
9

842.6
2

0.0075331
26
0.0013283
05
0.0340324
84

1/13/200
9
1/12/200
9

871.7
9
870.2
6

0.0017565
52
0.0228226

0.0425720
33
0.0542619
84

1/9/2009

42.82

1/8/2009

42.56

1/7/2009

43.39

1/6/2009

38.56

1/5/2009

39.08

1/2/2009

39.19

12/31/20
08

40

12/30/20
08

41.63

12/29/20
08

43.9

12/26/20
08

43.38

12/24/20
08

44.21

12/23/20
08

45.02

12/22/20
08

44.56

12/19/20
08

44.93

12/18/20
08

47.34

12/17/20
08
12/16/20

49.84
52.37

0.00609
04
0.01931
42

26
0.0215332
08

1/9/2009

890.3
5

1/8/2009

909.7
3

1/7/2009

906.6
5

1/6/2009

934.7

1/5/2009

927.4
5

0.0077867
38
0.0046793
15

1/2/2009

931.8

0.0311188
29

12/31/20
08

903.2
5

0.0140590
65

12/30/20
08

890.6
4

0.01191
58
0.01895
25
0.01815
58

12/29/20
08

869.4
2

0.0241139
83
0.0038801
12

12/26/20
08

872.8

0.0053419
24

12/24/20
08

868.1
5

0.01027
02
0.00826
91
0.05224
99
0.05146
23
0.04951
6
-

12/23/20
08

863.1
6

12/22/20
08

871.6
3

12/19/20
08

887.8
8

12/18/20
08

885.2
8

12/17/20
08
12/16/20

904.4
2
913.1

0.11801
35
0.01339
54
0.00281
08
0.02045
78
0.03994
16
0.05309
33

0.0033913
64
0.0304691
34

0.0057644
37
0.0097649
48
0.0184715
77
0.0029326
2
0.0213898
75
0.0096391
59
0.0500848

0.08049
79

08
12/15/20
08

56.76

12/12/20
08

54.28

12/11/20
08

55.78

12/10/20
08

55.73

12/9/200
8

58.91

12/8/200
8

58.49

12/5/200
8

59.93

12/4/200
8

63.64

12/3/200
8

60.72

12/2/200
8

62.98

12/1/200
8
11/28/20
08

68.51
55.28

11/26/20
08

54.92

11/25/20
08

60.9

11/24/20
08

64.7

11/21/20
08
11/20/20

72.67
80.86

08

32
0.0127668
61

0.04467
6
0.02725
95

12/15/20
08

868.5
7

12/12/20
08

879.7
3

0.00089
68
0.05549
23

12/11/20
08

873.5
9

12/10/20
08

899.2
4

0.00715
51
0.02432
14
0.06006
5

12/9/200
8

888.6
7

0.0118239
99
0.0233889
12

12/8/200
8

909.7

0.0376688
78

12/5/200
8

876.0
7

0.04696
91
0.03654
41
0.08416
25

12/4/200
8

845.2
2

0.0358490
48
0.0297464
76

12/3/200
8

870.7
4

0.0255080
56

12/2/200
8

848.8
1

0.21456
85
0.00653
36
0.10335
56
0.06052
8
0.11616
74
0.10679
06
0.08514

12/1/200
8
11/28/20
08

816.2
1
896.2
4

0.0391636
94
0.0935365
59
0.0095969
17

11/26/20
08

887.6
8

0.0347184
27

11/25/20
08

857.3
9

0.0065293
94

11/24/20
08

851.8
1

0.0627142
7

11/21/20
08
11/20/20

800.0
3
752.4

0.0613279
68
-

0.0070038
84
0.0289388
04

08

68

08

11/19/20
08

806.5
8

11/18/20
08

859.1
2

11/19/20
08

74.26

11/18/20
08

67.64

0.09337
29
0.02207
85

11/17/20
08

69.15

0.04193
73

11/17/20
08

850.7
5

11/14/20
08

873.2
9

11/13/20
08

911.2
9

11/14/20
08

66.31

11/13/20
08

59.83

0.10283
35
0.10509
31

11/12/20
08

66.46

0.07853
92

11/12/20
08

852.3

11/11/20
08

61.44

0.02404
99

11/11/20
08

898.9
5

11/10/20
08

59.98

11/10/20
08

919.2
1

11/7/200
8

930.9
9

0.0694818
27
0.0631055
23
0.0097902
96
0.0261493
75
0.0425934
9
0.0669226
01
0.0532888
38
0.0222871
9
0.0127339
31

11/7/200
8

56.1

0.06687
54
0.12673
47

11/6/200
8

63.68

0.15456
95

11/6/200
8

904.8
8

11/5/200
8

54.56

11/5/200
8

952.7
7

11/4/200
8

47.73

11/4/200
8

1005.
75

11/3/200
8

53.68

11/3/200
8

966.3

0.0400144
66
0.0025322
36

10/31/20
08

968.7
5

0.0152485
74

10/30/20
08

954.0
9

10/29/20
08

930.0
9

0.0254766
51
0.0111409
26

10/31/20
08

59.89

10/30/20
08

62.9

0.13374
09
0.11748
04
0.10946
91
0.04903
66
0.10637
75

10/29/20
08

69.96

0.04382
82

0.0284461
98
0.0515711
93
0.0541152
79

10/28/20
08
10/27/20
08

66.96

0.17868
09

10/28/20
08

940.5
1

80.06

0.01168
43

10/27/20
08

848.9
2

10/24/20
08

876.7
7

10/23/20
08

908.1
1

10/24/20
08

79.13

10/23/20
08

67.8

0.15452
99
0.02692
05

10/22/20
08

69.65

0.27111
75

10/22/20
08

896.7
8

10/21/20
08

53.11

10/21/20
08

955.0
5

10/20/20
08

52.97

0.00263
95
0.28347
27

10/20/20
08

985.4

10/17/20
08

940.5
5

10/16/20
08

946.4
3

10/17/20
08

70.33

10/16/20
08

67.61

0.03944
25
0.02396
72

10/15/20
08

69.25

0.22802
91

10/15/20
08

907.8
4

10/14/20
08

55.13

10/14/20
08

998.0
1

10/13/20
08

54.99

0.00254
27
0.24062
94

10/13/20
08

1003.
35

10/10/20
08

69.95

0.09014
84

10/10/20
08

899.2
2

10/9/200
8

63.92

0.10532
58

10/9/200
8

909.9
2

10/8/200
8

57.53

0.06926
61

10/8/200
8

984.9
4

0.03083
57
0.14243
6

10/7/200
8
10/6/200
8

996.2
3
1056.
89

10/7/200
8
10/6/200
8

53.68
52.05

0.1024573
28
0.0322797
47
0.0351208
16
0.0125549
47
0.0629531
25
0.0312839
55
0.0465828
4
0.0062322
01
0.0416288
6
0.0946951
45
0.0053363
84
0.1095719
59
0.0118289
63
0.0792240
42
0.0113974
29
0.0591077
58
0.0392793

10/3/200
8

45.14

0.00265
49

10/2/200
8

45.26

0.12830
55

10/2/200
8

1114.
28

10/1/200
8

39.81

10/1/200
8

1161.
06

9/30/200
8

39.39

0.01060
62
0.17066
04

9/30/200
8

1164.
74

9/29/200
8
9/26/200
8

1106.
42
1213.
27

9/25/200
8

1209.
18

9/24/200
8

1185.
87

9/29/200
8
9/26/200
8

10/3/200
8

1099.
23

01
0.0135985
22
0.0411249
25
0.0031645
05
0.0513683
08
0.0921896
16
0.0033767
5

9/25/200
8

32.82

9/24/200
8

35.19

0.29628
06
0.05685
37
0.06972
39
0.01494
88

9/23/200
8

35.72

0.05377
18

9/23/200
8

1188.
22

9/22/200
8

33.85

9/22/200
8

1207.
09

9/19/200
8

32.07

0.05401
8
0.03161
23
0.09007
82

0.0194657
61
0.0019797
07
0.0157561
15
0.0389868
11

9/19/200
8

1255.
08

0.0394674
21

9/18/200
8

1206.
51

0.17846
37
0.04516
9

9/17/200
8

1156.
39

0.0424288
11
0.0482880
65

9/16/200
8

1213.
6

0.21138
33
0.05076
01
0.00531
59

9/15/200
8
9/12/200
8

1192.
7
1251.
7

0.0173715
04
0.0482829
83
0.0021193
65

9/11/200
8

1249.
05

0.0137119
3

46.72
34.74

9/18/200
8

33.1

9/17/200
8

36.22

9/16/200
8

30.3

9/15/200
8
9/12/200
8

25.66

9/11/200
8

24.39

31.7

9/10/200
8

24.52

9/9/2008

25.47

0.03801
22

9/10/200
8

1232.
04

9/9/2008

1224.
51

0.0061305
68
0.0347344
63

9/8/2008

1267.
79

0.0203026
77

9/5/2008

1242.
31

9/4/2008

1236.
83

9/3/2008

1274.
98

9/2/2008

1277.
58

0.06089
71
0.01684
14
0.03627
73
0.02315
59

8/29/200
8

1282.
83

0.0044208
95
0.0303788
38
0.0020371
71
0.0041009
11
0.0138186
3

8/28/200
8

1300.
68

0.0147310
92

8/27/200
8

1281.
66

0.0079509
42

8/26/200
8

1271.
51

0.10870
42
0.05230
29
0.02982
33
0.04125
29

8/25/200
8

1266.
84

0.0036795
6
0.0198205
81

8/22/200
8

1292.
2

0.0112689
53

8/21/200
8

1277.
72

0.0024919
1

8/20/200
8

1274.
54

0.01419
81
0.06906
1

8/19/200
8
8/18/200
8

1266.
69
1278.
6

0.0061781
3
0.0093585
3
0.0152129

0.11778
3
0.01838
13
0.04120
35

9/8/2008

22.64

9/5/2008

23.06

9/4/2008

24.03

9/3/2008

21.43

0.11451
12
0.02579
6

9/2/2008

21.99

0.06287
25

8/29/200
8

20.65

8/28/200
8

19.43

8/27/200
8

19.76

8/26/200
8

20.49

8/25/200
8

20.97

8/22/200
8

18.81

8/21/200
8

19.82

8/20/200
8

20.42

8/19/200
8
8/18/200
8

21.28
20.98

6
8/15/200
8

19.58

8/14/200
8

20.34

0.03808
08
0.05778
64

8/13/200
8

21.55

8/12/200
8

21.17

8/11/200
8

20.12

8/8/2008

20.66

8/7/2008

21.15

8/6/2008

20.23

8/5/2008

21.14

8/4/2008

23.49

8/1/2008
7/31/200
8

22.57

7/30/200
8

22.94
21.21

8/15/200
8

1298.
2

0.0040677
29

8/14/200
8

1292.
93

0.01779
07

8/13/200
8

1285.
83

0.05087
07
0.02648
51
0.02344
04
0.04447
33
0.04400
03
0.10540
78

8/12/200
8

1289.
59

0.0055065
36
0.0029199
14
0.0121238
83

8/11/200
8

1305.
32

0.0069187
4

8/7/2008

1296.
32
1266.
07

0.0236118
67
0.0180965

8/6/2008

1289.
19

0.0033487
85

8/5/2008

1284.
88

8/4/2008

1249.
01

8/1/2008
7/31/200
8

1260.
31
1267.
38

0.0283140
91
0.0090064
85
0.0055940
55
0.0132309

7/30/200
8

1284.
26

0.0165344
93

7/29/200
8

1263.
2

7/28/200
8

1234.
37

0.0230874
65
0.0187716
43

7/25/200
8

1257.
76

7/24/200
8

1252.
54

0.03995
32
0.01626
05
0.07840
93
0.03793
24
0.09518
64

7/29/200
8

22.03

7/28/200
8

24.23

7/25/200
8

22.91

0.05601
8
0.02287
05

7/24/200
8

23.44

0.09526
75

8/8/2008

0.0041588
71
0.0233960
64

7/23/200
8

21.31

7/16/200
8
7/15/200
8

28.54

0.00611
91
0.08460
84
0.04246
92
0.03914
07
0.00359
21
0.12843
88
0.00210
45

7/22/200
8

21.18

7/21/200
8

23.05

7/18/200
8

24.05

7/14/200
8

28.48

0.03537
98

7/14/200
8

1228.
3

0.07162
07
0.01416
79

7/11/200
8
7/10/200
8

1239.
49
1253.
39

7/9/2008

1244.
69

7/8/2008

1273.
7

7/7/2008

1252.
31

7/3/2008

1262.
9

7/2/2008

1261.
52

7/17/200
8

7/11/200
8
7/10/200
8

25.01
25.1

27.49
25.59

7/9/2008

25.23

7/8/2008

23.15

7/7/2008

25.78

7/3/2008

24.79

7/2/2008

25.92

7/1/2008
6/30/200
8

23.65

6/27/200
8

23.95
23.44

0.08603
9
0.10760
42
0.03915
87
0.04457
45
0.09165
18
0.01260
52
0.02152
44
0.02068
89

7/23/200
8

1282.
19

7/22/200
8

1277

7/21/200
8

1260

0.0134018
56
0.0005395
37

7/18/200
8

1260.
68

0.0002856
01

7/17/200
8

1260.
32

0.0119410
12

7/16/200
8
7/15/200
8

1245.
36
1214.
91

0.0247546
45
0.0109611
0.0090689
05
0.0111518
76
0.0069653
78
0.0230395
48

7/1/2008
6/30/200
8
6/27/200
8

1284.
91
1280
1278.
38

0.0040559
76

0.0169362
05
0.0084208
18
0.0010933
21
0.0183713
34
0.0038285
99
0.0012664
27
0.0037243
41

6/26/200
8

23.93

6/25/200
8

21.14

0.12396
59
0.05878
64
0.00976
48
0.01010
78

6/26/200
8

1283.
15

6/25/200
8

1321.
97

6/24/200
8

1314.
29

6/23/200
8

1318

6/20/200
8

1317.
93

6/19/200
8

1342.
83

0.0298050
56
0.0058264
52
0.0028188
4

6/24/200
8

22.42

6/23/200
8

22.64

6/20/200
8

22.87

6/19/200
8

21.58

0.05805
9
0.03012
55

6/18/200
8

22.24

0.05119
86

6/18/200
8

1337.
81

6/17/200
8

1350.
93

0.0037453
79
0.0097592
96
0.0067943
91

6/16/200
8

1360.
14

8.08773E05

6/13/200
8

1360.
03

0.0149341
64

6/12/200
8

1339.
87

0.0032743
29
0.0170387
17
0.0024409
98

5.31122E05
0.0187170
03

6/17/200
8

21.13

6/16/200
8

20.95

6/13/200
8

21.22

6/12/200
8

23.33

0.00855
52
0.01280
55
0.09479
6
0.03330
13

6/11/200
8

24.12

0.03975
15

6/11/200
8

1335.
49

0.00259
18
0.01885
23

6/10/200
8

1358.
44

6/9/2008

1361.
76

6/6/2008

1360.
68

0.0007934
06
0.0313763
43

1404.
05
1377.
2

0.0193084
65
0.0003266

6/10/200
8

23.18

6/9/2008

23.12

6/6/2008

23.56

6/5/2008
6/4/2008

18.63
20.8

0.23477
72
0.11017
98
0.02729
21

6/5/2008
6/4/2008

6/3/2008

20.24

6/2/2008

19.83

5/30/200
8

17.83

5/29/200
8

18.14

5/28/200
8
5/27/200
8

19.07
19.64

0.02046
49
0.10631
35
0.01723
7
0.04999
7
0.02945
19
0.00459
3

6/3/2008

1377.
65

6/2/2008

1385.
67

97
0.0058046
28
0.0105598
51

5/30/200
8

1400.
38

0.0015150
22

5/29/200
8

1398.
26

0.0053207
25

5/28/200
8
5/27/200
8

1390.
84
1385.
35

5/23/200
8

1375.
93

0.0039550
66
0.0068229
49
0.0132984
91

5/22/200
8

1394.
35

5/23/200
8

19.55

5/22/200
8

18.05

0.07982
96
0.02947
81

5/21/200
8

18.59

0.05586
19

5/21/200
8

1390.
71

0.03296
05
0.03226
09
0.01037
54
0.08013
71
0.01795
78

5/20/200
8
5/19/200
8
5/16/200
8

1413.
4
1426.
63
1425.
35

0.0026139
49
0.0161837
41
0.0093168
7
0.0008976
22
0.0012495
97

5/15/200
8

1423.
57

0.0105289
03

5/14/200
8

1408.
66

5/13/200
8

1403.
04

0.0039975
87
0.0003848
05

5/12/200
8

1403.
58

5/9/2008
5/8/2008

1388.
28
1397.

5/20/200
8
5/19/200
8
5/16/200
8

17.58
17.01
16.47

5/15/200
8

16.3

5/14/200
8

17.66

5/13/200
8

17.98

5/12/200
8

17.79

0.01062
35
0.08715
19

5/9/2008
5/8/2008

19.41
19.4

0.00051
53
-

0.0109605
45
0.0067481
48
0.0036627

0.01686
73
5/7/2008

19.73

5/6/2008

18.21

5/5/2008

18.9

0.08016
94
0.03719
1

68

58
0.0182798
07

5/7/2008

1392.
57

5/6/2008

1418.
26

5/5/2008

1407.
49

0.0076227
92
0.0045438
67

5/2/2008

1413.
9

0.0032303
34

5/1/2008

1409.
34

5/2/2008

18.18

5/1/2008

18.88

0.03883
98
0.03778
11
0.09636
89

4/30/200
8

20.79

0.02681
13

4/30/200
8

1385.
59

4/29/200
8

20.24

0.03009
25

4/29/200
8

1390.
94

4/28/200
8

19.64

4/28/200
8

1396.
37

0.0169954
68
0.0038537
36
0.0038962
35
0.0010521
76

4/25/200
8

1397.
84

0.0064737
22

4/24/200
8

1388.
82

0.0064216
92

4/23/200
8

1379.
93

4/25/200
8

19.59

4/24/200
8

20.06

4/23/200
8

20.26

0.00254
91
0.02370
86
0.00992
07
0.02966
42

4/22/200
8

20.87

0.01788
78

4/22/200
8

1375.
94

4/21/200
8

20.5

0.01821
36
0.01185
2
0.00782
4
0.10399
57

4/21/200
8

1388.
17

0.0028956
39
0.0088491
99
0.0015547
96

4/18/200
8

1390.
33

0.0179765
28

4/17/200
8

1365.
56

0.0006226
49

4/16/200
8

1364.
71

0.0224377
17

4/18/200
8

20.13

4/17/200
8

20.37

4/16/200
8

20.53

4/15/200
8
4/14/200
8

22.78

0.04464
26

4/15/200
8

1334.
43

23.82

0.01522
87

4/14/200
8

1328.
32

0.06516
39
0.03706
61

4/11/200
8

1332.
83

4/10/200
8

1360.
55

4/9/2008

1354.
49

4/8/2008

1365.
54

0.0044640
3
0.0081249
55
0.0051130
83

4/7/2008

1372.
54

0.0015603
7

4/4/2008

1370.
4

0.0007957
05

4/3/2008

1369.
31

4/2/2008

1367.
53

0.0013007
7
0.0019359
25

4/1/2008

1370.
18

0.0352670
16

3/31/200
8

1322.
7

3/28/200
8

1315.
22

3/27/200
8

1325.
76

3/26/200
8

1341.
13

0.0056711
5
0.0079819
28
0.0115266
62
0.0088044
16

3/25/200
8
3/24/200
8

1352.
99
1349.
88

0.0023012
59
0.0152052
46

4/11/200
8

23.46

4/10/200
8

21.98

4/9/2008

22.81

4/8/2008

22.36

4/7/2008

22.42

4/4/2008

22.45

4/3/2008

23.21

4/2/2008

23.43

4/1/2008

22.68

3/31/200
8

25.61

3/28/200
8

25.71

3/27/200
8

25.88

3/26/200
8

26.08

3/25/200
8
3/24/200
8

25.72
25.73

0.01992
54
0.00267
98
0.00133
72
0.03329
26
0.00943
4
0.03253
38
0.12149
94
0.00389
71
0.00659
04
0.00769
83
0.01389
98
0.00038
87
0.03400

0.0045892
49
0.0033895
15
0.0205845
29

3/20/200
8

26.62

3/19/200
8

29.84

3/18/200
8
3/17/200
8
3/14/200
8
3/13/200
8

52
0.11418
7

3/20/200
8

1329.
51

3/19/200
8

1298.
42

25.79

0.14586
3
0.22322
11

3/18/200
8

1330.
74

32.24

0.03407
27

3/17/200
8

1276.
6

0.13261
49
0.00256
83

3/14/200
8
3/13/200
8

1288.
14
1315.
48

0.03210
43
0.10846
65

3/12/200
8

1308.
77

3/11/200
8

1320.
65

0.06649
19
0.00218
02

3/10/200
8

1273.
37

3/7/2008

1293.
37

3/6/2008

1304.
34

3/5/2008

1333.
7

3/4/2008

1326.
75

3/3/2008

1331.
34

31.16
27.29

3/12/200
8

27.22

3/11/200
8

26.36

3/10/200
8

29.38

3/7/2008

27.49

3/6/2008

27.55

3/5/2008

24.6

3/4/2008

25.52

3/3/2008

26.28

0.11325
61
0.03671
6
0.02934
57
0.00984
48

2/29/200
8

26.54

0.12037
68

2/29/200
8

1330.
63

23.53

0.03635
19

2/28/200
8
2/27/200
8

1367.
68
1380.
02

2/28/200
8
2/27/200
8

22.69

0.0236623
13
0.0245870
38
0.0415348
85
0.0089990
24
0.0210023
01
0.0051138
53
0.0090362
75
0.0364571
1
0.0155842
86
0.0084459
51
0.0222598
69
0.0052246
92
0.0034536
11
0.0005334
4
0.0274633
59
0.0089821
18

VIX vs. S&P500 (2008-2009)

0.3

0.2

Daily Change

0.1

0
Appendix B: VIX vs. Dow Calculations and Graph
2/22/2008
4/12/2008
6/1/2008 Adj 7/21/2008
Adj
Date

Close

VIX

Date

Close

DOW

45.49

0.0002
2
0.0181
9
0.1456

-0.2
2/23/200
9
52.62

0.0651
72

2/23/200
9

7114.7
8

0.0460
76
0.0288
9
0.0041
2

2/20/200
9

7365.6
7

2/19/200
9

7465.9
5

0.0122
9
0.0109
5
0.0326
54
0.0346
6
0.0135
2
0.0119
4

2/18/200
9

7555.6
3

0.0004
01

2/26/200
9
44.66
-0.1
2/25/200
9
2/24/200
9

2/20/200
9

44.67

49.3

-0.3
2/19/200
9
47.08
2/18/200
9

48.46

2/26/200
9

7182.0
8

2/25/200
9
2/24/200
9

7270.8
9
7350.9
4

9/9/2008

Date

10/29

2/17/200
9

48.66

2/13/200
9

42.93

0.0386
7
0.0104
4
0.0008
5

0.1252
86

2/17/200
9

7552.6

2/13/200
9

7850.4
1

2/12/200
9

7932.7
6

2/11/200
9

7939.5
3

2/10/200
9

7888.8
8

2/9/2009

8270.8
7

0.0064
0.0472
9
0.0011
7

2/6/2009

8280.5
9

0.0266
2

2/5/2009

8063.0
7

2/4/2009

7956.6
6

0.0132
85
0.0151
8

2/3/2009

8078.3
6

2/12/200
9

41.25

2/11/200
9

44.53

0.0399
2
0.0765
1
0.0469
4

2/10/200
9

46.67

0.0671
27

2/9/2009

43.64

2/6/2009

43.37

0.0062
06
0.0082
7
0.0027
4

2/5/2009

43.73

2/4/2009

43.85

2/3/2009

43.06

0.0181
8
0.0555
6

2/2/2009

45.52

0.0150
51

2/2/2009

7936.8
3

1/30/200
9

44.84

0.0505
42

1/30/200
9

8000.8
6

0.0722
15
0.0632
6
0.0782
8

1/29/200
9

8149.0
1

0.0176
75
0.0080
4
0.0183
5
0.0274
1

1/28/200
9

8375.4
5

0.0242
57

1/27/200
9
1/26/200
9

8174.7
3
8116.0
3

1/23/200
9

8077.5
6

0.0072
07
0.0047
51
0.0055
9

1/29/200
9

42.63

1/28/200
9

39.66

1/27/200
9
1/26/200
9
1/23/200
9

42.25
45.69
47.27

-0.034
0.0004
2

1/22/200
9

47.29

1/21/200
9

46.42

1/20/200
9
1/16/200
9
1/15/200
9
1/14/200
9
1/13/200
9
1/12/200
9

1/22/200
9

8122.8

1/21/200
9

8228.1

0.2058
62
0.1008
0.0371
52

1/20/200
9
1/16/200
9
1/15/200
9

7949.0
9
8281.2
2
8212.4
9

43.27

0.1272
14
0.0577

1/14/200
9
1/13/200
9

8200.1
4
8448.5
6

45.84

0.0681
52

1/12/200
9

8473.9
7

1/9/2009

8599.1
8

1/8/2009

8742.4
6

1/7/2009

8769.7

1/6/2009

9015.1

-0.003
0.0146
7
0.0165
2
0.0031
1
0.0276
0.0069
25

1/5/2009

8952.8
9

0.0091

1/2/2009

9034.6
9

0.0290
06

12/31/20
08

8776.3
9

0.0123
82

12/30/20
08

8668.3
9

12/29/20
08

8483.9
3

0.0215
09
0.0037
2

12/26/20
08
12/24/20

8515.5
5
8468.4

0.0055
43
0.0058

56.65
46.11
51
49.14

1/9/2009

42.82

1/8/2009

42.56

1/7/2009

43.39

1/6/2009

38.56

1/5/2009

39.08

1/2/2009

39.19

12/31/20
08

40

12/30/20
08

41.63

12/29/20
08

43.9

12/26/20
08
12/24/20

0.0128
8

0.0185
68
0.1991
6

43.38
44.21

0.0060
9
0.0193
1
0.1180
14
0.0134
0.0028
1
0.0204
6
0.0399
4
0.0530
9
0.0119
16
0.0189
5
-

0.0344
98
0.0409
3
0.0083
34
0.0015
05
0.0298
4

0.0181
6

08
12/23/20
08

45.02

12/22/20
08

44.56

12/19/20
08

44.93

12/18/20
08
12/17/20
08
12/16/20
08

47.34
49.84
52.37

12/15/20
08

56.76

12/12/20
08

54.28

12/11/20
08

55.78

12/10/20
08

55.73

12/9/200
8

58.91

12/8/200
8

58.49

12/5/200
8
12/4/200
8
12/3/200
8
12/2/200
8
12/1/200
8

59.93
63.64
60.72
62.98
68.51

08

02
0.0118
3
0.0069
5
0.0030
1
0.0251
7
0.0112
5
0.0411
31
0.0075
8

0.0102
7
0.0082
7
0.0522
5
0.0514
6
0.0495
2
0.0805

12/23/20
08

8419.4
9

12/22/20
08

8519.6
9

12/19/20
08

8579.1
1

12/18/20
08

8604.9
9

12/17/20
08
12/16/20
08

8824.3
4
8924.1
4

0.0446
76
0.0272
6

12/15/20
08

8564.5
3

12/12/20
08

8629.6
8

0.0008
97
0.0554
9

12/11/20
08

8565.0
9

12/10/20
08

8761.4
2

0.0071
55
0.0243
2
0.0600
6
0.0469
69
0.0365
4
0.0841
6
0.2145
69

12/9/200
8

8691.3
3

0.0080
32
0.0275
6

12/8/200
8

8934.1
8

0.0340
12

12/5/200
8
12/4/200
8

8635.4
2
8376.2
4

0.0304
73
0.0254

12/3/200
8

8591.6
9

0.0202
94

12/2/200
8
12/1/200
8

8419.0
9
8149.0
9

0.0325
95
0.0801

0.0075
13
0.0226
6

11/28/20
08

11/28/20
08

8829.0
4

4
0.0116
69

11/26/20
08

8726.6
1

0.0287
29

11/25/20
08

8479.4
7

0.0042
64

11/24/20
08

8443.3
9

0.0481
57

11/21/20
08

8046.4
2

0.0633
76
0.0572
5
0.0520
7

11/26/20
08

54.92

11/25/20
08

60.9

11/24/20
08

64.7

11/21/20
08

72.67

0.0065
34
0.1033
6
0.0605
3
0.1161
7
0.1067
9

11/20/20
08

80.86

0.0851
47

11/20/20
08

7552.2
9

0.0933
73
0.0220
8

11/19/20
08

7997.2
8

11/18/20
08

8424.7
5

11/17/20
08
11/14/20
08

8273.5
8
8497.3
1

11/13/20
08

8835.2
5

55.28

11/19/20
08

74.26

11/18/20
08

67.64

11/17/20
08
11/14/20
08
11/13/20
08

59.83

0.0419
37
0.1028
34
0.1050
9

11/12/20
08

66.46

0.0785
39

11/12/20
08

8282.6
6

11/11/20
08

61.44

0.0240
5

11/11/20
08

8693.9
6

11/10/20
08

8870.5
4

11/7/200
8

8943.8
1

69.15
66.31

11/10/20
08

59.98

11/7/200
8

56.1

0.0668
75
0.1267
3

11/6/200
8

63.68

0.1545
7

11/6/200
8

8695.7
9

11/5/200
8

54.56

0.1337
41

11/5/200
8

9139.2
7

0.0181
06
0.0266
8
-0.039
0.0645
85
0.0484
6
0.0201
1
0.0082
3
0.0281
23
0.0497
4
0.0518
1

11/4/200
8

47.73

11/3/200
8

53.68

0.1174
8
0.1094
7
0.0490
4
0.1063
8

11/4/200
8

9625.2
8

11/3/200
8

9319.8
3

0.0322
49
0.0018
3

10/31/20
08

9336.9
3

0.0168
75

10/30/20
08

9180.6
9

10/29/20
08

8990.9
6

0.0208
83
0.0082
1

10/28/20
08

9065.1
2

10/31/20
08

59.89

10/30/20
08

62.9

10/29/20
08

69.96

10/28/20
08

66.96

0.0438
28
0.1786
8

10/27/20
08

80.06

0.0116
84

10/27/20
08

8175.7
7

10/24/20
08

8378.9
5

10/23/20
08

8691.2
5

0.1032
59
0.0245
5
0.0365
9

10/24/20
08

79.13

10/23/20
08

67.8

0.1545
3
0.0269
2

10/22/20
08

69.65

0.2711
17

10/22/20
08

8519.2
1

10/21/20
08

53.11

10/21/20
08

9045.2
1

10/20/20
08

52.97

0.0026
4
0.2834
7

10/20/20
08

9265.4
3

0.0394
43
0.0239
7

10/17/20
08

8852.2
2

10/16/20
08

8979.2
6

0.2280
29
0.0025
43
0.2406
3

10/15/20
08
10/14/20
08

8577.9
1
9310.9
9

0.0457
27
0.0820
1
0.0082

10/13/20
08

9387.6
1

0.1050
83

10/17/20
08

70.33

10/16/20
08

67.61

10/15/20
08
10/14/20
08
10/13/20
08

69.25
55.13
54.99

0.0199
93
0.0599
1
0.0240
5
0.0456
22
0.0142
5

10/10/20
08

69.95

0.0901
48

10/10/20
08

8451.1
9

10/9/200
8

63.92

0.1053
26

10/9/200
8

8579.1
9

10/8/200
8

57.53

0.0692
66

10/8/200
8

9258.1

10/7/200
8

53.68

0.0308
36

10/7/200
8

9447.1
1

10/6/200
8

52.05

10/6/200
8

9955.5

10/3/200
8

45.14

0.1424
36
0.0026
5

10/3/200
8

10325.
38

10/2/200
8

45.26

0.1283
06

10/2/200
8

10482.
85

0.0106
06
0.1706
6

10/1/200
8

10831.
07

9/30/200
8

10850.
66

9/29/200
8
9/26/200
8

10365.
45
11143.
13

9/25/200
8

11022.
06

9/24/200
8

10825.
17

10/1/200
8

39.81

9/30/200
8

39.39

9/29/200
8
9/26/200
8

0.0150
3
0.0761
6
0.0202
1
0.0524
2
0.0364
8
0.0151
4
0.0326
8
0.0018
1
0.0457
48
0.0723
5
0.0109
24

9/25/200
8

32.82

9/24/200
8

35.19

0.2962
81
0.0568
54
0.0697
2
0.0149
5

9/23/200
8

35.72

0.0537
72

9/23/200
8

10854.
17

0.0540
18
0.0316
1
0.0900
8

9/22/200
8

11015.
69

0.0180
25
0.0026
8
0.0147
7
0.0332
8

9/19/200
8

11388.
44

0.0329
15

9/18/200
8

11019.
69

0.0379
19

46.72
34.74

9/22/200
8

33.85

9/19/200
8

32.07

9/18/200
8

33.1

9/17/200
8

36.22

9/16/200
8

0.0414
8

9/17/200
8

10609.
66

30.3

0.1784
64
0.0451
7

9/16/200
8

11059.
02

9/15/200
8

31.7

0.2113
83

9/15/200
8

10917.
51

9/12/200
8

25.66

9/12/200
8

11421.
99

9/11/200
8

24.39

9/11/200
8

11433.
71

0.0145
18

9/10/200
8

24.52

0.0507
6
0.0053
2
0.0380
1

0.0128
78
0.0451
7
0.0010
3

9/10/200
8

11268.
92

9/9/2008

25.47

9/9/2008

11230.
73

0.0033
95
0.0246
3

0.1177
83
0.0183
8
0.0412

9/3/2008

11188.
23
11532.
88

9/2/2008

11516.
92

8/29/200
8

11543.
55

8/28/200
8

11715.
18

0.0183
2

8/27/200
8

11502.
51

0.0078
24

20.49

0.0608
97
0.0168
4
0.0362
8
0.0231
6

0.0254
97
0.0029
21
0.0303
4
0.0013
85
0.0023
1
0.0147
6

8/26/200
8

11412.
87

20.97
18.81

0.1087
04
-

8/25/200
8
8/22/200

11386.
25
11628.

0.0023
35
0.0210
1
0.0171

9/8/2008

22.64

9/5/2008

23.06

9/4/2008

24.03

9/3/2008

21.43

0.1145
11
0.0258

9/2/2008

21.99

0.0628
72

8/29/200
8

20.65

8/28/200
8

19.43

8/27/200
8

19.76

8/26/200
8
8/25/200
8
8/22/200

9/8/2008
9/5/2008
9/4/2008

11510.
74
11220.
96

8
8/21/200
8

19.82

8/20/200
8

20.42

8/19/200
8
8/18/200
8

0.0523
0.0298
2
0.0412
5

06

61

8/21/200
8

11430.
21

0.0011
19

8/20/200
8

11417.
43

8/19/200
8
8/18/200
8

11348.
55
11479.
39

0.0060
51
0.0114
6
0.0156

8/15/200
8

11659.
9

0.0037
78

8/14/200
8

11615.
93

8/15/200
8

19.58

8/14/200
8

20.34

0.0141
98
0.0690
61
0.0380
8
0.0577
9

8/13/200
8

21.55

0.0177
91

8/13/200
8

11532.
96

8/12/200
8

21.17

8/12/200
8

11642.
47

8/11/200
8

20.12

8/11/200
8

11782.
35

0.0040
85

8/8/2008

20.66

0.0508
71
0.0264
9
0.0234
4

0.0071
68
0.0094
5
0.0119
4

8/8/2008

11734.
32

8/7/2008

21.15

0.0444
73

8/6/2008

20.23

0.0261
51
0.0194
6
0.0034
63

8/5/2008

21.14

21.28
20.98

8/4/2008

23.49

8/1/2008

22.57

7/31/200
8

22.94

7/30/200
8

21.21

-0.044
0.1054
1
0.0399
53
0.0162
6
0.0784
09
0.0379
3

8/6/2008

11431.
43
11656.
07

8/5/2008

11615.
77

8/4/2008

11284.
15

8/1/2008

11326.
32

7/31/200
8

11378.
02

0.0289
65
0.0037
3
0.0045
5
0.0179
1

7/30/200
8

11583.
69

0.0161
99

8/7/2008

7/29/200
8
7/28/200
8
7/25/200
8
7/24/200
8
7/23/200
8

22.03
24.23
22.91

0.0951
9
0.0560
18
0.0228
7

7/29/200
8
7/28/200
8

11397.
56
11131.
08

0.0236
58
0.0213

7/25/200
8

11370.
69

7/24/200
8
7/23/200
8

11349.
28
11632.
38

0.0018
85
0.0246
4
0.0025
72

7/22/200
8

11602.
5

7/21/200
8

11467.
34

0.0117
18
0.0025
5

7/18/200
8

11496.
57

0.0043
51

7/17/200
8

11446.
66

0.0182
83

7/16/200
8

11239.
28

7/21/200
8

23.05

7/18/200
8

24.05

7/17/200
8

25.01

7/16/200
8

25.1

0.0952
68
0.0061
19
0.0846
1
0.0424
7
0.0391
4
0.0035
9
0.1284
4

7/15/200
8

28.54

0.0021
05

7/15/200
8

10962.
54

28.48

0.0353
8

7/14/200
8

11055.
19

0.0716
21
0.0141
68

7/11/200
8
7/10/200
8

11100.
54
11229.
02

7/22/200
8

7/14/200
8
7/11/200
8
7/10/200
8

23.44
21.31
21.18

27.49
25.59

7/9/2008

25.23

7/8/2008

23.15

7/7/2008

25.78

7/3/2008

24.79

0.0860
39
0.1076
0.0391
59
0.0445
7

7/8/2008

11147.
44
11384.
21

7/7/2008

11231.
96

0.0249
31
0.0084
2
0.0040
9
0.0115
1
0.0072
92
0.0210
2
0.0134
64
0.0050
2

7/3/2008

11288.
53

0.0064
9

7/9/2008

7/2/2008

25.92

7/1/2008
6/30/200
8

23.65

6/27/200
8

23.95
23.44

6/26/200
8

23.93

6/25/200
8

21.14

6/24/200
8

22.42

6/23/200
8

22.64

6/20/200
8

22.87

0.0916
52
0.0126
1
0.0215
24
0.0206
9

7/2/2008

11215.
51

7/1/2008
6/30/200
8

11382.
26
11350.
01

6/27/200
8

11346.
51

0.1239
66
0.0587
9
0.0097
6
0.0101
1

6/26/200
8

11453.
42

6/25/200
8

11811.
83

6/24/200
8

11807.
43

6/23/200
8

11842.
36

6/20/200
8

11842.
69

6/19/200
8

12063.
09

0.0147
6
0.0028
37
0.0003
08
0.0093
8
0.0308
1
0.0003
73
0.0029
5
-2.8E05
0.0184
4

6/19/200
8

21.58

0.0580
59
0.0301
3

6/18/200
8

22.24

0.0511
99

6/18/200
8

12029.
06

6/17/200
8

21.13

0.0085
55
0.0128
1
0.0948
0.0333
0.0397
52
0.0025
92
0.0188
5
0.2347

6/17/200
8

12160.
3

6/16/200
8
6/13/200
8
6/12/200
8
6/11/200
8
6/10/200
8

12269.
08
12307.
35
12141.
58
12083.
77
12289.
76

0.0028
25
0.0108
5
0.0089
1
0.0031
1
0.0135
61
0.0047
73
0.0169
0.0007
68

6/9/2008
6/6/2008

12280.
32
12209.

0.0057
58
-

6/16/200
8
6/13/200
8
6/12/200
8
6/11/200
8
6/10/200
8
6/9/2008
6/6/2008

20.95
21.22
23.33
24.12
23.18
23.12
23.56

6/5/2008

18.63

6/4/2008

20.8

6/3/2008

20.24

6/2/2008

19.83

5/30/200
8
5/29/200
8
5/28/200
8
5/27/200
8

17.83
18.14
19.07
19.64

77
0.1101
8
0.0272
92
0.0204
65
0.1063
14
0.0172
4
-0.05
0.0294
5
0.0045
93

81
6/5/2008
6/4/2008

12604.
45
12390.
48

6/2/2008

12402.
85
12503.
82

5/30/200
8
5/29/200
8

12638.
32
12646.
22

5/28/200
8
5/27/200
8

12594.
03
12548.
35

5/23/200
8

12479.
63

5/22/200
8

12625.
62

6/3/2008

0.0318
1
0.0171
21
-0.001
0.0081
1
0.0107
0.0006
2
0.0041
35
0.0036
34
0.0054
91
0.0116
3

5/23/200
8

19.55

5/22/200
8

18.05

0.0798
3
0.0294
8

5/21/200
8

18.59

0.0558
62

5/21/200
8

12601.
19

0.0329
6
0.0322
61

5/20/200
8
5/19/200
8

12828.
68
13028.
16

0.0103
75
0.0801
4
0.0179
6

5/16/200
8

12986.
8

0.0019
37
0.0178
9
0.0154
3
0.0031
8
0.0004
5

5/15/200
8

12992.
66

0.0072
83

5/14/200
8

12898.
38

0.0106
24
0.0871

5/13/200
8
5/12/200
8

12832.
18
12876.
05

0.0051
46
0.0034
1
0.0101
61

5/20/200
8
5/19/200
8

17.58
17.01

5/16/200
8

16.47

5/15/200
8

16.3

5/14/200
8

17.66

5/13/200
8
5/12/200
8

17.98
17.79

5
5/9/2008

19.41

5/8/2008

19.4

5/7/2008

19.73

5/6/2008

18.21

5/5/2008

18.9

5/2/2008

18.18

5/1/2008

18.88

4/30/200
8
4/29/200
8

20.79
20.24

4/28/200
8

19.64

4/25/200
8

19.59

4/24/200
8
4/23/200
8
4/22/200
8
4/21/200
8

20.06
20.26
20.87
20.5

4/18/200
8

20.13

4/17/200
8
4/16/200

20.37
20.53

0.0005
15
0.0168
7

0.0094
4

5/9/2008

12745.
88

5/8/2008

12866.
78

5/7/2008

12814.
35

5/6/2008

13020.
83

5/5/2008

12969.
54

0.0039
47
0.0068
1

5/2/2008

13058.
2

0.0036
98

5/1/2008

13010

0.0268
11
0.0300
93

4/30/200
8
4/29/200
8

12820.
13
12831.
94

0.0025
49
0.0237
1
0.0099
2
0.0296
6
0.0178
88
0.0182
14
0.0118
5
0.0078
2
-0.104

4/28/200
8

12871.
75

0.0147
02
0.0009
2
0.0031
0.0015
6

4/25/200
8

12891.
86

0.0033
34

4/24/200
8

12848.
95

0.0066
94

4/23/200
8
4/22/200
8
4/21/200
8

12763.
22
12720.
23
12825.
02

0.0033
74
0.0082
0.0019

4/18/200
8

12849.
36

0.0179
72

4/17/200
8
4/16/200

12620.
49
12619.

9.67E05
0.0205

0.0801
69
0.0371
9
0.0388
4
0.0377
8
0.0963
7

0.0040
83
0.0159
8

8
4/15/200
8
4/14/200
8
4/11/200
8

22.78
23.82
23.46

4/10/200
8

21.98

4/9/2008

22.81

4/8/2008

22.36

4/7/2008

22.42

4/4/2008

22.45

0.0446
4
0.0152
29
0.0651
64
0.0370
7

3/28/200
8

25.71

0.0199
25
0.0026
8
0.0013
4
0.0332
9
0.0094
3
0.0325
34
0.1215
0.0039
0.0065
9

3/27/200
8

25.88

0.0077

4/3/2008

23.21

4/2/2008

23.43

4/1/2008
3/31/200
8

22.68
25.61

3/26/200
8

26.08

3/25/200
8

25.72

3/24/200
8

25.73

3/20/200
8

26.62

0.0139
0.0003
9
0.0340
1
0.1141
9

27

4/15/200
8
4/14/200
8
4/11/200
8

12362.
47
12302.
06
12325.
42

0.0048
99
0.0019
0.0206

4/10/200
8

12581.
98

4/9/2008

12527.
26

4/8/2008

12576.
44

0.0043
59
0.0039
2
0.0028
6

4/7/2008

12612.
43

4/4/2008

12609.
42

0.0002
39
0.0013
2

4/1/2008
3/31/200
8

12626.
03
12608.
92
12654.
36
12262.
89

3/28/200
8

12216.
4

3/27/200
8

12302.
46

3/26/200
8

12422.
86

3/25/200
8

12532.
6

0.0013
56
0.0036
0.0314
24
0.0037
98
0.0070
2
0.0097
4
0.0087
9
0.0012
8

3/24/200
8

12548.
64

0.0150
4

3/20/200
8

12361.
32

0.0213
95

4/3/2008
4/2/2008

3/19/200
8
3/18/200
8
3/17/200
8
3/14/200
8
3/13/200
8
3/12/200
8

29.84
25.79
32.24
31.16
27.29
27.22

3/11/200
8

26.36

3/10/200
8

29.38

3/7/2008

27.49

3/6/2008

27.55

3/5/2008

24.6

0.1458
63
0.2232
2
0.0340
73

3/19/200
8

12099.
66

3/18/200
8
3/17/200
8

12392.
66
11972.
25

0.1326
15
0.0025
68

3/14/200
8
3/13/200
8

11951.
09
12145.
74

0.0321
04
0.1084
7

3/12/200
8

12110.
24

3/11/200
8

12156.
81

0.0664
92
0.0021
8

3/10/200
8

11740.
15

3/7/2008

11893.
69

3/6/2008

12040.
39

3/5/2008

12254.
99

3/4/2008

12213.
8

3/3/2008

12258.
9

3/4/2008

25.52

3/3/2008

26.28

0.1132
56
0.0367
2
0.0293
5
0.0098
4

2/29/200
8

26.54

0.1203
77

2/29/200
8

12266.
39

23.53

0.0363
52

2/28/200
8
2/27/200
8

12582.
18
12694.
28

2/28/200
8
2/27/200
8

22.69

0.0239
3
0.0345
13
0.0017
69
0.0161
6
0.0029
27
0.0038
4
0.0348
75
0.0129
9
0.0122
6
0.0176
7
0.0033
67
0.0036
9
0.0006
1
0.0254
2
0.0088
7

VIX vs. DOW (2008-2009) C

0.3

0.2

Daily Change

0.1

0
Appendix C: VIX vs. S&P 500 Prediction Calculations and Graph
2/22/2008
4/12/2008
6/1/2008
7/21/2008
9/9/2008
Date

VIX

Log Change

S&P
500

1/2/2009

39.19

12/1/2008

40

11/3/2008

55.28

0.020457842
0.323531725
0.080098367

10/1/2008

59.89

0.418997569

968.75

1330.63
1378.55

-0.1

-0.2 39.39
9/2/2008
8/1/2008

20.65

7/1/2008
6/2/2008
5/1/2008

22.94
23.95
17.83

4/1/2008

20.79

3/3/2008

25.61

0.645796658
0.105166792
0.043086212
0.295085892
-0.15358967
0.208510798
0.035670129

2/1/2008
1/2/2008

26.54
26.2

0.012893618
0.152244102

-0.3

Log Change

931.8

0.031118829

903.25

1164.74

0.007791136
0.077798346
0.184246584
0.096570689

1282.83

0.012116797

1267.38
1280
1400.38

-0.0099083
-0.08988355
0.010617587

1385.59

0.04645094
0.005977412
0.035379708
-0.06311391

896.24

1322.7

Date

10/2

12/3/2007

22.5

11/1/2007
10/1/2007

22.87
18.53

9/4/2007

18

8/1/2007

0.016310699

1468.36
1481.14
1549.38
1526.75

0.035168284

23.38

0.210434968
0.029019282
0.261509198
0.005970167

-0.00866593
0.045042789
0.014713558

1473.99

7/2/2007

23.52

0.370989742

1455.27

6/1/2007

16.23

1503.35

5/1/2007

13.05

1530.62

0.032030724

4/2/2007
3/1/2007

14.22
14.64

0.218073248
0.085861291
0.029108084
-0.05190786

0.012781559
0.032504501
0.017976931

1482.37
1420.86

2/1/2007

15.42

1406.82

1/3/2007
12/1/2006

10.42
11.56

1438.24
1418.3

0.013961173
0.012536836

11/1/2006

10.91

1400.63

0.016332505

10/2/2006

11.1

1377.94

0.031021837

9/1/2006
8/1/2006
7/3/2006

11.98
12.31
14.95

1335.85
1303.82
1276.66

0.024269376
0.021051125
0.005072924

6/1/2006

13.08

0.391938332
0.103823827
0.057871063
0.017265308
0.076293484
0.027173348
-0.19429936
0.133626954
0.228633044

0.042379836
0.009930484
0.022088306

1270.2

5/1/2006
4/3/2006

16.44
11.59

1270.09
1310.61

3/1/2006
2/1/2006
1/3/2006
12/1/2005

11.39
12.34
12.95
12.07

1294.87
1280.66
1280.08
1248.29

0.011034734
0.000452994
0.025147961
-0.00095285

11/1/2005

12.06

0.349574732
0.01740688
0.080110241
-0.04824977
0.070372753
0.000828844
0.239264973

8.66043E-05
0.031404914
0.012082374

1249.48

10/3/2005

15.32

1207.01

9/1/2005

11.92

0.250941503
0.055479152

0.034581238
0.017899994

8/1/2005

12.6

1220.33

7/1/2005

11.57

6/1/2005

12.04

5/2/2005

13.29

0.085281273
0.039818899
0.098777433
0.141494337

1228.81

1234.18

0.006924907
0.011285468

1191.33

0.035336452
0.000142687

1191.5

0.029512223

4/1/2005

15.31

0.088021328

1156.85

3/1/2005

14.02

1180.59

2/1/2005

12.08

1/3/2005
12/1/2004

12.82
13.29

11/1/2004
10/1/2004

13.24
16.27

9/1/2004

13.34

8/2/2004

15.29

0.148933689
0.059455259
0.036005421
0.003769322
0.206080371
0.198555881
0.136431979
0.001960144

7/1/2004

15.32

6/1/2004

14.34

5/3/2004

15.5

0.066106329
0.077787189
0.103487795

4/1/2004

17.19

0.026526754

1107.3

3/1/2004
2/2/2004

16.74
14.55

1/2/2004
12/1/2003
11/3/2003

16.63
18.31
16.32

10/1/2003

16.1

0.140210071
-0.1336173
0.096239065
0.115056009
0.013572078
0.344426322

9/2/2003

22.72

8/1/2003

18.63

7/1/2003
6/2/2003

19.49
19.52

5/1/2003

19.47

4/1/2003

21.21

3/3/2003

29.15

2/3/2003

29.63

0.198472409
0.045128329
0.001538067
0.002564762
0.085597949
0.317982144
0.016332449
0.050668732

1/2/2003

31.17

0.08535032

855.7

12/2/2002

28.62

11/1/2002
10/1/2002

27.5
31.14

0.039919769
0.124307162
-0.2426061

1203.6

0.020313519
0.019302752

1181.27
1211.92

0.018726935
0.025615748
0.031942491

1173.82
1130.2

0.037868779
0.013916956

1114.58

0.009320337

1104.24
1101.72

0.002284721
0.034892238

1140.84

0.017829189

1120.68

1126.21
1144.94

0.012011024
0.016933393
0.016494221
0.012135101

1131.13
1111.92
1058.2

0.017128882
0.049518899
0.007103225

1050.71
995.97

0.053504268
0.012016233

1008.01

0.017715344

990.31
974.5

0.016093506
0.011258626

963.59

0.049645665

916.92

0.07792735

848.18

879.82

0.008322874
0.017149844
0.027797494
0.062229277

936.31
885.76

0.055500585
0.082914421

841.15

9/3/2002
8/1/2002

39.69
32.64

0.195560737
0.018865566

815.28
916.07

7/1/2002

32.03

0.23192379

911.62

6/3/2002

25.4

0.240017401

989.82

5/1/2002

19.98

-0.09221138

1067.14

4/1/2002

21.91

1076.92

3/1/2002

17.4

0.230472947
0.215760038

2/1/2002

21.59

1106.73

1/2/2002

21.09

12/3/2001

23.8

11/1/2001
10/1/2001

24.92
33.56

0.02343125
0.120886586
0.045985113
0.297664188
0.049788875

9/4/2001

31.93

0.247875313

1040.94

8/1/2001

24.92

0.142051882

1133.58

7/2/2001

21.62

1211.23

6/1/2001

19.06

5/1/2001

22.64

4/2/2001

25.48

0.126026914
0.172126355
0.118175577
0.116910511

3/1/2001
2/1/2001
1/2/2001

28.64
28.35
22.02

1160.33
1239.94
1366.01

12/1/2000

26.85

0.010177312
0.252675899
-0.19831469
0.099196304

11/1/2000

29.65

0.226945034

1314.95

10/2/2000

23.63

0.138683388

1429.4

9/1/2000

20.57

1436.51

8/1/2000

16.84

0.200076695
0.208307194

7/3/2000

20.74

1430.83

6/1/2000

19.54

5/1/2000
4/3/2000

23.65
26.2

0.059600556
0.190899468
0.102396296
0.101550987

1147.39

0.116561168
0.004869544
0.082299872
0.075214343
0.009122942
0.063384683

1130.2

0.036080076
0.020984887
0.015696374

1148.08

0.007545292

1139.45
1059.78

1224.38

0.07248435
0.017937188
0.085256615
0.066255606
0.010798221
0.025354152

1255.82

0.005077288

1249.46

0.074007011
0.066358544
-0.09683109
0.034050246

1320.28

1517.68

1454.6
1420.6
1452.43

0.004045193
0.083456134
0.004961785
0.054966292
0.058928158
0.016476253
0.023651631
0.022158698
-

0.012755275
0.065420674

1498.58

0.0641378
0.032789823
0.085433556
0.135050508

1394.46

0.031279977
0.092323812
0.020313063
0.052244823

1469.25
1388.91

0.0562328
0.018882473

1362.93

0.038512581
0.007740923

1282.71

0.155572144
0.185556401

1328.72

0.060661767
0.028967267
0.006273778
0.032570815

0.012683484
0.074936765
0.181174439

1301.84
1335.18

0.060243597
0.07226352
0.063078611
0.075507553
0.378363178
0.078181298
0.579689455

1238.33
1279.64

0.038060601
0.032815091
0.040190831

1229.23

0.054843528

1163.63

0.057444072

1098.67

0.077233407

1017.01
957.28

0.229717532
0.078519478

1120.67

0.060526299
-0.15758607
0.011683381

1090.82
1111.75
1101.75

0.009035526
0.04873843

1049.34

0.068078429

980.28

0.010098973

970.43

0.015609171

27.43

0.006588259
0.134121398
0.266708949
0.146186823
0.111813798
0.133166895
0.246278885

0.038680395
0.019005643

955.4

35.09

0.426342693

914.62

0.043621422
0.035086042

3/1/2000

23.67

2/1/2000

23.37

1/3/2000

24.95

12/1/1999
11/1/1999

23.4
24.18

10/1/1999

22.2

9/1/1999

25.41

8/2/1999

24.45

7/1/1999

24.64

6/1/1999

21.09

5/3/1999
4/1/1999

25.39
25.07

3/1/1999

23.26

2/1/1999
1/4/1999

27.88
26.25

12/1/1998

24.42

11/2/1998

26.01

10/1/1998

28.05

9/1/1998
8/3/1998

40.95
44.28

7/1/1998

24.8

6/1/1998

19.71

5/1/1998

21.32

4/1/1998
3/2/1998

21.18
24.22

2/2/1998

18.55

1/2/1998

21.47

12/1/1997

24.01

11/3/1997
10/1/1997

1366.42

1320.41

1372.71

1286.37

1133.84

0.05300824
0.025287466
0.037241816

9/2/1997

22.91

8/1/1997

24.76

7/1/1997
6/2/1997

21.48
21.53

5/1/1997

19.19

4/1/1997
3/3/1997
2/3/1997
1/2/1997

20.06
22.14
21.1
19.47

12/2/1996

20.92

11/1/1996
10/1/1996

17.14
18.11

9/3/1996
8/1/1996

16.95
17.01

7/1/1996

19.46

6/3/1996
5/1/1996

13.68
16.07

4/1/1996
3/1/1996
2/1/1996
1/2/1996
12/1/1995

15.83
18.88
17.04
12.53
12.52

11/1/1995

11.58

10/2/1995
9/1/1995

13.83
12.74

8/1/1995
7/3/1995

11.52
13.49

6/1/1995
5/1/1995

11.38
13.77

4/3/1995
3/1/1995

11.75
13.37

2/1/1995

11.75

1/3/1995
12/1/1994
11/1/1994

0.077655951

947.28

0.142107178
0.002325042
0.115058001
0.044338473
0.098658145
0.048112887
0.080398221
-0.07183082

899.47

0.051789019
0.059182865

954.31
885.14

0.075242742
0.042535055

848.28

0.056925444

801.34
757.12
790.82
786.16

0.199290726
0.055049359
0.066196438
0.003533573
-0.13455967

740.74

0.056763565
-0.04354862
0.005910048
0.059510648
0.021739987

757.02
705.27

0.070808965
0.025766182

687.33
651.99

0.352426165
0.161019268
0.015047306
0.176196287
0.102539639
0.307437752
0.000798403
0.078047894
0.177560674

639.95

0.052785302
0.018639176
0.046827521

670.63
669.12

0.002254153
0.02259616

654.17
645.5
640.43
636.02
615.93

0.013342046
0.007885385
0.006909816
0.032096689
0.017293479

605.37
581.5
584.41
561.88
562.06
544.75
533.4

0.021055362
0.035667976

514.71
500.71

0.027576544
0.026962467

487.39

0.035438711

11.96
13.2

0.082093496
0.100661995
0.157864015
0.170091242
0.190634884
0.158639072
0.129160151
0.129160151
0.017714508
0.098649081
-0.189242

0.040228869
0.004991819
0.039314487
0.000320302
0.031281632

470.42
459.27

15.95

0.091180786

453.69

0.02398764
0.012224127
0.040306091

10/3/1994

14.56

0.019418086

472.35

9/1/1994
8/1/1994

14.28
11.97

462.71
475.49

7/1/1994

11.13

0.176456437
0.072759354
0.296404033

6/1/1994

14.97

444.27

5/2/1994
4/4/1994

13.03
13.77

0.138793807
0.055237922
-0.39549057

3/1/1994

20.45

0.318637122

445.77

2/1/1994

14.87

467.14

1/3/1994

10.63

481.61

0.031983824

12/1/1993
11/1/1993

11.66
13.76

466.45
461.79

0.010040591
-0.01299474

10/1/1993

11.46

0.335665568
0.092483989
0.165601652
0.182903121
0.125317119

0.012320937
0.011464639
0.046825875
0.030505659

467.83

9/1/1993
8/2/1993

12.99
11.85

0.091851963
0.010178205

458.93
463.56

7/1/1993

11.73

448.13

6/1/1993
5/3/1993

11.26
13.47

4/1/1993

12.42

3/1/1993
2/1/1993

12.53
13.16

1/4/1993
12/1/1992

12.42
12.57

11/2/1992
10/1/1992
9/1/1992

13.01
16.15
14.28

0.04089304
0.179208368
0.081156914
0.008817692
0.049056157
0.057873849
0.012004946
-0.03440527
0.216201757
0.123060093
0.050261835

0.019207289
0.010038133
0.033852458
0.005341299

8/3/1992

13.58

414.03

7/1/1992

13.17

6/1/1992

13.35

5/1/1992

13.86

4/1/1992

15.53

3/2/1992
2/3/1992

16.18
16.68

0.030656606
0.013574869
0.037490609
0.113766643
0.041002274
0.030434485
-

458.26

456.5
450.91

450.53
450.19

0.020619728
0.027245343
0.036909143
0.031004223
0.027156214

440.19

0.000754952
0.022463264
0.025745373

451.67
443.38

0.018524635
0.010429042

438.78
435.71

0.007021264
0.010057059

431.35
418.68
417.8

0.029812921
0.002104056
0.009064414
0.024290181

424.21
408.14

0.038618363
0.017511285

415.35

0.000963507

414.95

0.027510774

403.69
412.7

-0.02207368
0.009543823

0.042259809
1/2/1992

17.4

12/2/1991
11/1/1991

19.31
20.26

10/1/1991

15.48

9/3/1991

15.85

8/1/1991

14.46

7/1/1991
6/3/1991

15.18
19.55

5/1/1991
4/1/1991

15.93
18.24

3/4/1991
2/1/1991

16.88
21.23

1/2/1991
12/3/1990

20.91
26.38

11/1/1990

22.16

10/1/1990

30.04

9/4/1990

29.11

8/1/1990
7/2/1990

29.9
21.11

6/1/1990

15.5

5/1/1990

17.37

4/2/1990

19.52

3/1/1990

19.73

2/1/1990
1/2/1990

21.99
25.36

-0.10415289
0.048025402
0.269099631
0.023620632

408.78

0.020124912

417.09
375.22

0.105789505
-0.04489662

392.45

0.091783284
0.048592555
0.252996514
0.204771163
0.135412861
0.077487495
0.229285787
0.015187762
0.232378634
0.174317285
0.304240965

387.86

0.011764691
0.019329331

395.43

0.019458251

387.81
371.16

0.043882292
-0.04907751

389.83
375.34

0.037878465
0.000319761

375.22
367.07

0.021959955
0.065114417

343.93
330.22

0.040679049
0.024524557

322.22

0.031448069
0.026776723

304

0.058206841
0.006720786
0.052540678
0.099062825
-0.00523686
0.008926024

0.348111619
0.308906838
0.113904556
0.116695001
0.010700739
0.108447485
0.142585325
#DIV/0!

306.05
322.56
356.15
358.02
361.23
330.8

0.088000911
0.027255168

339.94

0.023965543

331.89
329.08

0.008502706
#DIV/0!

VIX Value vs. S&P 500 Value (P

1800

1600

1400

Stock Value

1200

1000

Appendix D: Volatility Smile Calculations (Maple)

800

Volatility Smile

Stephen Perno
Kaitlin Cherundolo
April 22, 2009

600

Using the Black-Scholes function on Maple, we calculated the 'volatility smiles' of

Microsoft,400
Citigroup, JP Morgan, General Motors, and Amazon.
>

200
Microsoft
Option Data from April 16, 2009 with expiry October 16, 2009.
The first step is to solve for the riskless interest rate, 'r':

0
8/30/89

5/26/92

2/20/95

11/16/97

8/12/00
Date

>

>

Then we use the BlackScholes function in Maple to find the implied volatilities for the
options at various strike prices. The following is the call option data at six different strike
prices:
>

>

>

>

Citigroup
Option Data from April 16, 2009 with expiry September 18, 2009.
The first step is to solve for the riskless interest rate, 'r':

>

>

Then we use the BlackScholes function in Maple to find the implied volatilities for the
options at various strike prices. The following is the call option data at eight different
strike prices:
>

>

>

>

JP Morgan
Option Data from April 16, 2009 with expiry September 18, 2009.
The first step is to solve for the riskless interest rate, 'r':

>

>

Then we use the BlackScholes function in Maple to find the implied volatilities for the
options at various strike prices. The following is the call option data at eleven different
strike prices:

>

>

>

>

Compute the same interest rate r and use the strikes and option prices to calculate the
implied volatility for expiry June 19, 2009.

>

>

>

>

>

>

Finally, compute the last interest rate r and use the strikes and option prices to calculate
the implied volatility for expiry September 18, 2009.

>

>

>

>

>

>

Combine the plots into one complete plot and notice how the volatility smile with the
greatest volatility and the steepest slope is the one closest to expiry.
>

>

Appendix E: Maple Class Example (Empty Worksheet)

Volatility Smile Walkthrough Example for the Class

Stephen Perno and Kaitlin Cherundolo
>
First, choose a company to compute its volatility smile. Start the calculation by listing
the stock price S at closing or where it stands at the moment, the at-the-money Call price
C, the at-the-money Put price P, the time to maturity T, and the at-the-money strike price
K. The at-the-money numbers can be found in the options page of your company at the
border of the highlighted and non-highlighted prices. Try to keep T as accurate as
possible (denom = 12 for months, 52 for weeks, 252 for days)
Name of Company:
>

To find the riskless interest rate, r, we use the equation for r solved through the Put-Call
Parity.

>
Create two arrays choosing strike prices K that have high volumes (can be found on the
right side of the chart of option data) for the one array and a different array of the option
prices x for the chosen strike prices.
>
Create the for loop to compute the implied volatility for each pair of strike and option
prices.

>

Create yet another array this time pairing the particular implied volatilities with their
respective strike prices which can be plotted.

>
Plot the volatility smile being sure not to forget to set the ranges for both the volatility
and for the strike prices.
>

Appendix F: Maple Class Example (Exxon Mobil)

Volatility Smile Walkthrough Example for the Class

Stephen Perno and Kaitlin Cherundolo
>
First, choose a company to compute its volatility smile. Start the calculation by listing
the stock price S at closing or where it stands at the moment, the at-the-money Call price

C, the at-the-money Put price P, the time to maturity T, and the at-the-money strike price
K. The at-the-money numbers can be found in the options page of your company at the
border of the highlighted and non-highlighted prices. Try to keep T as accurate as
possible (denom = 12 for months, 52 for weeks, 252 for days)
Name of Company:Exxon Mobil

>

To find the riskless interest rate, r, we use the equation for r solved through the Put-Call
Parity.

>

Create two arrays choosing strike prices K that have high volumes (can be found on the
right side of the chart of option data) for the one array and a different array of the option
prices x for the chosen strike prices.

>
Create the for loop to compute the implied volatility for each pair of strike and option
prices.

>

Create yet another array this time pairing the particular implied volatilities with their
respective strike prices which can be plotted.
>

Plot the volatility smile being sure not to forget to set the ranges for both the volatility
and for the strike prices.
>

>