FRM Part I · FRM Exam Part I · Measuring Return, Volatility, and Correlation
The VIX closes at 16 on Monday and 20 on Tuesday. Treating these as annualized volatilities in percent, what is the percentage change in the implied variance (VIX squared) between the two days?
Squaring the index levels gives variances of 256 and 400, an increase of 144, or 56.25% of 256. The 25% change applies only to the volatility level, not to variance.
- A25.0%
- B56.3%Correct
- C20.0%
- D36.0%
Explanation
Variance Monday = 256; Tuesday = 400. Change = (400-256)/256 = 144/256 = 56.25%. The 25% figure is the change in volatility, not variance.
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