VIX creator can’t understand fuss over volatility

With the CBOE Volatility Index, or VIX, stuck near record lows for months, traders & market pundits have been twisting themselves into knots trying to explain why. With the CBOE Volatility Index, or VIX, stuck near record lows for months, traders & market pundits have been twisting themselves into knots trying to explain why.

The more pessimistic crowd says that the lack of price swings indicates that complacency has crept into the market, setting it up for a painful unwind should a shock occur. Others blame the rapid rise of passive investment.

Dan Galai, a professor emeritus at the Hebrew University of Jerusalem and the co-creator of the VIX, doesn’t get what all the fuss is about. Galai said that he thinks the VIX has succeeded in its job of reflecting stock market fear. To him, traders and the overall market are speaking for themselves, and the market has remained efficient. And while he doesn’t see the doesn’t see the VIX staying at ultra-low levels forever he sees no reason why it should be higher right now.

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