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Convexity & tails

How is convexity and tail risk priced?
Convexity — VVIX & VVIX/VIX

VVIX — the 30-day implied vol of VIX itself, i.e. the price of convexity / demand for VIX options ('uncertainty about uncertainty') — alongside the VVIX/VIX ratio.

How VVIX is the Cboe vol-of-vol index (the VIX algorithm applied to options on VIX); the ratio normalizes it by spot VIX.Source Cboe via Yahoo Finance

vol_convexity

How to read Higher VVIX = the market paying up for convexity right now. A present-state read of demand for tail/convexity protection.

DESCRIPTIVE. The result that a higher VVIX forecasts lower tail-hedge returns (Park 2013) is a forecasting study — it is reframed here as a 'price of convexity' level, not built as a signal.

SKEW — Tail Pricing

The CBOE SKEW index — the option-implied price of the left tail of the 30-day SPX distribution. Rises as out-of-the-money puts get richer relative to the body.

How Cboe computes SKEW = 100 − 10·S, where S is the option-implied (risk-neutral) skewness from SPX option prices.Formula SKEW = 100 − 10 · SSource Cboe via Yahoo Finance

skew_index

How to read Higher SKEW = the market paying more for crash protection right now — a present-state read of tail-risk PRICING.

Cboe's own 2025 consultation concedes the academic third-moment SKEW diverges from how desks read skew (it proposed a 25-delta risk-reversal instead). Treat SKEW as the price of the tail, not a literal crash probability or forecast.

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