Wednesday, April 18, 2012

(Artemis Capital) Volatility at World's End: Two Decades of Movement in Markets

The movement of stock prices has been an obsession for generations of speculators and traders. On a higher level mathematicians believe that modern markets are an extension of the same fractal beauty found in nature. Visualized these stock markets may take the shape of a turbulent ocean with waves made of human hopes, dreams, greed, and fear.

Merging the world of high-finance and high-art Artemis Capital Management LLC is proud to present a creative visualization of stock market volatility over the last two decades. The project was conceived by Christopher Cole, with visual design and programming by Jayson Haebich, and featuring the song "Blood" by Monsieur Adi from the Album "Fire Fire Fire". The video was first shown in conjunction with Christopher Cole's speech at the 2012 Global Derivatives and Risk Management Conference in Barcelona Spain.

Volatility at World’s End: Two Decades of Movement in Markets is a depiction of real stock market variance using trading data from 1990 to 2011. The visuals are designed from S&P 500 index option data replicating the implied volatility wave (or variance swap curve) extending to an expiration of one year. The front of the volatility wave contains the same data used to calculate the CBOE VIX index. The movement of this wave demonstrates changing trader expectations of future stock market volatility. As the wave moves through time the expected (or implied) volatility surface transforms into a realized volatility surface derived from historical S&P 500 index movement. The transition represents what professional traders call ‘volatility arbitrage’. The color variation in the volatility waves show the volatility-of-volatility or internal movement of the wave. The track underneath the volatility wave represents underlying S&P 500 index prices.

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