Vix volatility index hits 2016 low as markets find their feet

Billy Bambrough
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Markets are still lurching from positive to negative, but have mostly stabilised since swings earlier in the year (Source: Getty)

The Chicago Board Options Exchange (CBOE) Vix index, a measure of implied option volatility cost on the US S&P 500, has sunk to lows for 2016 after wild market swings earlier in the year sent the index soaring.

​Last night the Vix closed at 13.09, its lowest finish to a session since 17 August after China's 50 per cent stock market crash sent investors fleeing from markets in the US and Europe.

By 24 August 24 the S&P 500 had tumbled 9.7 per cent in just four sessions.

Read more: Why the VIX fear index is clearly the wrong price

Some have cautioned this return to calm will not last.

Last month the the Bank for International Settlements (BIS) warned the volatile start to the year for financial markets may only mark the beginning of a realisation that the world economy has become more fragile.

Claudio Borio, head of the monetary and economic department at the Swiss-based global financial regulator said:

The tension between the markets’ tranquillity and the underlying economic vulnerabilities had to be resolved at some point. In the recent quarter, we may have been witnessing the beginning of its resolution.

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Amid other volatility indices, the JP Morgan flobal FX volatility index is 11.4, with a 10 year average of 10.5 as central banks keep investors guessing and the risk of a British exit from the European Union rises to a head before the vote on 23 June.

Oil, which plunged by 70 per cent to lows of $27 per barrel in January, saw its own volatility index peak in February.

The CBOE Oil Vix hit 79 on 12 February, shortly after oil hit its low for the year. The price has now rebounded to over $40 per barrel and the Oil Vix has settled to around 46m, on an average of 37.5 over the past 10 years.

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