Summary of Understanding Global Volatility

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Understanding Global Volatility summary
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Volatility in both global and US markets fell into a historically low range in the second half of 2017. While this turn of events represented welcome news for risk-averse investors, the unexpected decrease in volatility baffled many economists. Federal Reserve Board researchers Juan M. Londono and Beth Anne Wilson examine international volatility and evaluate eight variables as the main components that move its needle. getAbstract suggests this technical and astute analysis to investors, economists and market specialists interested in the vicissitudes of volatility.

In this summary, you will learn

  • How markets measure volatility from sovereign and global perspectives,
  • What underpinned low volatility in 2017, and
  • Why US factors may not play a pivotal role in the volatility metrics.
 

About the Authors

Juan M. Londono and Beth Anne Wilson are economists with the Board of Governors of the Federal Reserve.

 

Summary

Worldwide financial volatility, as seen in indexes such as the Chicago Board Options Exchange Volatility Index (VIX), plunged to historical lows for a variety of investment vehicles toward the end of 2017. Economists seeking to understand this phenomenon must answer two questions about global volatility: “What are its fundamental drivers?” and, based on those factors, “Are recent levels of volatility unexpectedly low?”


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