Important Notice: Our web hosting provider recently started charging us for additional visits, which was unexpected. In response, we're seeking donations. Depending on the situation, we may explore different monetization options for our Community and Expert Contributors. It's crucial to provide more returns for their expertise and offer more Expert Validated Answers or AI Validated Answers. Learn more about our hosting issue here.

Why do you normalize the IV index to fixed maturities (f.e. 30 days)?

April 26, 2017days f.e fixed index IV maturities normalize

0

Posted

Why do you normalize the IV index to fixed maturities (f.e. 30 days)?

1 Answer

0

Posted

Normalization of the IV index to a constant maturity allows correct comparison of IV data in a historical perspective. Comparing the IV of the average of one of a few maturities over time is commonplace, but this practice is not very accurate as the average number of days that the Implied volatility is representing is not constant.