When I was in the process of publishing the winners of the 2008 Volatility Awards last week, I paused before finalizing Don Fishback’s Market Update as the recipient of the award for Best New Blog with a Volatility Focus. While there are many excellent blogs out there, my hesitation had nothing to do with the quality of Don’s site, which you should judge for yourself. Instead I wondered what would happen if hundreds of curious readers clicked over to the site and Don just happened to be taking a couple of weeks off for the holidays.
Well…Don is back and has a post up that is the early leader in the volatility post of the year category (should I decide to invent such a beast at some point.) Starting with the not-so-pity title of Probability, VIX, Bad Math, and Reporters Who Don’t Know the Difference: Measure, Don’t Model, Don Addresses some of the mathematical shortcomings of the Kearns and Tsang article, VIX Fails to Forecast S&P 500 Drop, Loses Followers and argues from the specific to the general case. For dessert, Don Serves up a nifty tool to help readers visualize the various probabilities and distributions associated with the VIX and the SPX.
Assuming the VIX does not spike back up to the 80s again, I will use this space to talk a lot more about probabilities and distributions in 2009 – and their application to the study of volatility.