When looking at Asset Classes….
An asset class is a group of investments that have similar characteristics, are subject to the same laws and regulations, and generally respond similarly to market fluctuations.
CBOE Indexes of Volatility, Correlation, and Skew
CBOE Implied Correlation, Volatility of Volatility, and Skew are measures incorporating option market information and expectations about the S&P500 volatility in the near future.
The Volatility Premium and Black-Scholes Pricing
The implied volatility is generally equal to or significantly greater than the forecasted volatility; for instance, the BSM implied volatility is, in general, an upward biased estimator. Indeed, by selling implied volatility a risk premium is provided because of the many expected and unexpected events that may occur. Moreover, market microstructure posits that implied volatility should be biased high because market makers profit from the bid-ask spread in the options by slightly raising their quotes (i.e., going slight long volatility exposure particularly on the downside). However, this absolutely doesn’t mean that it is always possible to profit by selling implied volatility
Oil Correlations with Commodity Currencies
Currencies move with supply and demand, politics, interest rates, speculation, and GDP. Thus, whenever growth in a country is mainly commanded by commodities exports, some currencies are generally correlated with commodity prices. Major commodity currencies include the Australian Dollar, the New Zealand Dollar, the Canadian Dollar, the Japanese Yen, and the Swiss Franc. Minor currencies include the Russian Ruble, the Colombian Peso, and the Peruvian Sol.
