vol

Koala · October 25th, 2005, 3:16 am

why do the short dates vols is higher than long dates vols signals risk averse market?why do the long dates vols is higher than short dates vols signals risk seeking market?

jomni · October 25th, 2005, 5:44 am

It actually means that people are more fickle and emotional on the short end.Even looking at historical vol (not implied), the short end of the yield curve is more volatile than the long end.And statistically speaking, you might see some mean reversion characteristics in the market (volatile in the short run but normalizes in the long run).