Type: Academic Working Paper / Financial Research Document Main Topic: A theoretical and mathematical deconstruction of the VIX Index, challenging its traditional label as a pure "fear gauge" by separating it into upside (greed) and downside (fear) volatility components. Speakers/Authors: Juan Andrés Serur (NYU), José P. Dapena (UCEMA), and Julián R. Siri (UCEMA). Origin: Universidad del CEMA (Buenos Aires, Argentina), Working Paper Series No. 780 (March 2021). This academic working paper was published in March 2021 to challenge a foundational, takenforgranted assumption in modern finance: that a rising VIX index intrinsically signifies rising market panic or fear. The authors aim to formally deconstruct the VIX formula, structurally proving that because it incorporates both OutOfTheMoney (OTM) Calls and OTM Puts, it measures absolute volatility (uncertainty) which includes extreme upside buying pressure (greed) just as much as downward hedging (fear). Their ultimate goal is to propose a novel "GreedFear index" that utilizes the concept of mathematical semivariance to provide investors with a more accurate, bifurcated gauge of true market sentiment. (As this is an academic paper, the focus is on financial theory and statistical methodology). Figure 1: The VIX aggregates both downside hedging (Fear) and upside speculation (Greed) into a single, undifferentiated volatility score. The VIX Index (Conventional View): Introduced by the Chicago Board Options Exchange (CBOE) in 1993, the VIX is widely regarded by Wall Street and retail investors alike as the premier "Fear Gauge" or "Uncertainty Index." It measures the implied volatility of the S&P 500 over the next 30 days. The Core Flaw: The VIX aggregate score is derived from options premiums. It combines the expected volatility implicit in outofthemoney (OTM) puts (which investors buy to protect against a crash—Fear) and outofthemoney (OTM) calls (which investors buy to speculate on massive upside—Greed).
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