Volatility in vogue

Cover story

Sparked by the US subprime mortgage crisis, global volatility has risen to its highest level this year. The Chicago Board Options Exchange Volatility Index (Vix) reached 37.5 points on August 17, its highest level since 2002, and nearly double the historical average of 18.9 points since 1990. Stock markets also tumbled. Between August 8-15, the S&P 500 index plunged by 6% and the Dow Jones Eurostoxx 50 index slumped by 4.5%.

The value of many equity-linked structured products has decreased si

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