The late August market selloff caused several measures of risk to perk up; now that markets have found a surer footing, it is worth checking up on some popular risk metrics.
1. Historical volatility: Right now, the look-back window for a one month SPX close-close volatility estimate and for the GJR-GARCH model includes the large market declines that occurred in mid-August. In the next few sessions, those volatile days will begin to fall out of the calculation window, and price-based estimates of volatility will decline. I expect SPX one month historical volatility to come down to about 8% by this time next week, assuming no large market declines in the coming week. In that context, short term puts priced at 16% and greater look positively rich.
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