Interpreting VVIX as Uncertainty About Implied Volatility
Summary
The document asks how to interpret VVIX, an index representing the market’s expected volatility of VIX, and compares two informal explanations. One describes volatility of volatility as uncertainty about how the size of daily price moves may change. The other likens VIX to the speed of market moves and VVIX to their acceleration, suggesting higher VVIX may accompany sharper or faster changes in the market.
The material raises a useful distinction between uncertainty about the level of volatility and the pace or timing of underlying price moves. It offers no independent analysis, data, or resolution of whether the analogies are accurate or how they fit together. The analogies are presented as interpretations found elsewhere, not as a formal definition or tested relationship, so readers should not treat VVIX as a direct measure of the speed of SPX moves.
Key ideas
- VVIX represents expected volatility of VIX over a forward period.
- One informal interpretation treats it as uncertainty about how market volatility may change.
- Another analogy links higher VVIX with faster or sharper market moves.
- The document poses these interpretations as a question and does not validate them empirically.
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# Interpretation of Volatility of Volatility (VVIX) # Interpretation of Volatility of Volatility (VVIX) Recently I came across the VVIX index (also known as VIX of VIX), which represents the 30 day implied (expected) Volatility of the VIX Index. I studied CBOE's Whitepaper for the VIX, which explains the methodology used for calculating the VIX and VVIX. While I think to have understood the calculations for the two indices, I am still struggling to interpret volatility of volatility itself. Doing research online I found the following two explanations: $Explanation\; 1$: "If we drop statistical rigour for a moment, you can think of volatility (roughly) as the possible range of a price change for a day, and then vol of vol is how much those ranges change from day to day...In this sense, the indicators are suggesting that while the market expects price changes to be relatively small, it thinks there is a larger than usual possibility that the magnitude of those price changes will change as well (and from experience, likely become larger)." Source: https://www.reddit.com/r/investing/comments/6mf8ps/can_anyone_explain_vvix/ $Explanation\; 2$ "Many refer to VVIX as a “volatility of volatility” measure or a 2nd derivative of the SPX. If the VIX is the speed of the SPX, VVIX is the acceleration of the SPX...It measures the quickness of market moves. If the VVIX is low, declines and rallies in the market are slower and take months to develop. If the VVIX is high, declines and rallies in the market are faster and take only days or weeks to develop. The higher the VVIX, the sharper the EKG diagram of the market. While the VIX measures the amplitude of SPX oscillations, the VVIX measures their period." Source: https://www.investing.com/analysis/record-vvix-suggests-market-turbulence-will-remain-200529555 So now finally my question: First of all are these explanations roughly accurate? And if so, how can the two explanations be put together? Both seem to make sense for me, but I don't see where they come together. Thanks in advance and cheers, Sanoj
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