SEC Follow Up Exhibits Part C SEC_OEA_FCIC_001760-2501

Market Volatility Forecast
The graphs in the previous section are based on historical measures of realized volatility.
These metrics are inherently “backward-looking,” in that they only measure what
happened in the past, they do not reflect what the market perceives likely to happen in the
future. The CBOE Volatility Index (VIX) is a “forward-looking” measure, designed to
capture the market’s forecast of volatility for the month, as reflected implicitly in the
prices of exchange-traded S&P 500 index options. Figure 3 graphs the level of the VIX
index from before the crisis until January 30, 2009. The index peaked above 80 on
November 20, 2008, and declined to close at 40 at the end of the year. During January
2009, the index remained predominantly in the 40s, but fluctuated between an intraday
low of 36.88 on January 2 to an intraday high of 57.36 on January 20.
90
80
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60
50
40
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Figure 3
CBOE Volatility Index (VIX)
1/2/2008 - 1/30/2009
0
Jan-08 May-08 Sep-08 Jan-09
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DRAFT: Produced by OEA
SEC_OEA_FCIC_001806