Pricing in a volatile market

Pricing problems in unstable markets: 1) What is the main reason for market price volatility? The scope and method of this general cause is applied to the paper pulp market. First, market segmentation leads to price volatility. In fact, you can not establish your own policy, you can form the jungle law. Each producer adjusts the price based on operational cost, investment, production volume. The more employment rules differ from country to country, living standards are divided by the world, so it is easy to explain the difference between the two prices.

If prices are unstable, the market will fluctuate. Price instability arises from the uncertainty of key players in the market as they are not sure about the price direction. Forecasting difficult market is difficult. However, traders who make high-risk investments make considerable profit in these markets.

Let's begin by defining volatility. Volatility is the degree of change in market prices everyday. Volatility is high if the high and low values ​​change significantly, and volatility is low if the fluctuation is small. Chicago board option exchange volatility index (stock code VIX) measures the implied volatility of the S & P 500 option market. High VIX means market volatility, low VIX means no market fluctuation. It is designed to measure trader's expectations for volatility over the next 30 days. But traders resemble everyone else, and they can not see the future. Or they can? Let's try it.

CBOE VIX aims to measure the volatility of the market using Standard & Poor's 500 trading option price. Throughout the year, the volatility of the market is low. However, Chicago Board Option Exchange Exchange Volatility Index (VIX) rose by 40% in the middle of the week, then declined over the weekend. This suggests that the market volatility may increase. 90% of the S & P 500's earnings report in the first quarter shows that the revenue growth rate of the S & P 500 remains high and the average growth rate is 13.6%. The dollar has fallen by 5% since 2017, but it helps companies selling overseas. Converting to dollars these revenues are more valuable, so lower dollars will help companies with foreign income.

In the above, I outlined a method to avoid losses in highly fluctuating markets. However, the use of hedging also severely limits your upside. ETF is available to benefit from variation. The volatility index (VIX) is a measure of price volatility, and if volatility is expected to rise, more can be done with that index. From the graph, there was a clear peak from 1998 to 2002. Of course, September and October 2008 were very striking on the right side. There was also a significant increase in May / June 2010 (Greece relief in the debt crisis) and August - October 2011 (US credit rating downgrade and debt ceiling competition). The graph on the right side of 2011 is relatively calm, except for August 2015