One of the great features of the RiskAPI Add-In is the ability to quickly generate implied volatilities from standard option symbols. How quickly? As they say, a picture is worth a thousand words:

Here we took today's (February 16th) top 10 most active U.S. equity options by volume and generated implied volatilities based on their last closing market price. This particular method uses pre-set keywords via the Add-In's "Market Macro" mechanism. The symbols being used follow the OCC's standard option symbology coupled with a ".X" suffix, which identifies listed U.S. Equity options in the RiskAPI system.

The RiskAPI service is numerically solving for implied volatility for each option based on a configurable model for each option (black-scholes, tree-based, or closed-form approximation). Included is also a delta calculation for each option as well. Note that all calculations occur on the service-side, with Excel merely being used as the launch pad for requests.

The results above were calculated using The RiskAPI Add-In, our unique software client which allows fund managers to access a whole spectrum of on-demand portfolio risk analysis calculations.

2011 was quite the year and we have the numbers to prove it. Below is a trailing one-month realized volatility chart for the S&P 500 index. Of note is the spike in August into September, which coincided with some of the worst news from the EU debt crisis hitting the wires:

With a Greek default deadline looming once again in February, 2012 should be no less interesting.

The results above were calculated using The RiskAPI Add-In, our unique software client which allows fund managers to access a whole spectrum of on-demand portfolio risk analysis calculations.

As all eyes have been on the debt crisis in Europe, increasingly volatile US equity market gyrations have continued unabated. If there were any doubt as to the nature of these daily triple-digit Dow moves and double-digit SP500 moves, one need only look at the recent spike in SP500/EUR correlation. Presented below is a chart showing trailing 1-month correlation of the US market Vs. the Euro.

It will be interesting to see if the recent correlation high of 0.816 is breached and/or if this will be a harbinger of perfect correlation (i.e. 1.0) between the Euro currency and the US stock market.

The results above were calculated using The RiskAPI Add-In, our unique software client which allows fund managers to access a whole spectrum of on-demand portfolio risk analysis calculations.

Presented below is a snapshot of a correlation matrix of all 500 S&P index components (equal weighted). Values were shaded to correspond with low correlations (red) and high correlations (green). Correlations based on returns from present going back to Jan 1, 2011.

The full matrix, composed of 250,000 individual calculation results was generated by the RiskAPI system in about 10 seconds. For those interested, the full result set is available for download here.

The results above were calculated using The RiskAPI Add-In, our unique software client which allows fund managers to access a whole spectrum of on-demand portfolio risk analysis calculations.

The dramatic sell-off in the commodities markets that was kick started by last Wednesday's (9/21) FOMC meeting resulted in an equally dramatic increase in realized volatility, most notably in the precious metals. The greatest casualty of this liquidation was Silver, which saw a fall from $40 to a low of $26 in overnight trading early Monday, a decline in excess of 30% in a mere 3 days of trading.

The effect of this move on spot silver's realized volatility has been quite dramatic, jumping from a 30-day low of 29% to as high as 72% in 48 hours. Below is a volatility-over-time chart for the white metal:

The results above were calculated using The RiskAPI Add-In, our unique software client which allows fund managers to access a whole spectrum of on-demand portfolio risk analysis calculations.

Wednesday's FOMC meeting outcome was a throwback to FED action not seen since 1961. The result was "operation twist": a plan to sell $400 billion of short term securities and to purchase an equivalent amount of bonds from 6 years to 30 years in maturity. Bernanke's hopes are that this action will keep long term rates low, thus improving the environment for those depending on the long end of the US yield curve for financing.

The effect, so far, of this action has been a 3-standard deviation move in the US 30 year bond, which immediately rocketed in price and has not looked back since. As of Tuesday 9/20, a one standard deviation move in the front 30-Year US bond future was 1.08%. By the close of business on Wednesday 9/22, the bond had moved 3.06%: a very large move indeed.

Here are the current 1-standard deviation values for all CME US Bond Futures as of the close on 9/20, prior to the FOMC meeting.

The results above were calculated using The RiskAPI Add-In, our unique software client which allows fund managers to access a whole spectrum of on-demand portfolio risk analysis calculations.

With the EU debt crisis occupying front page headlines since early August, all eyes have been on the major European stock indexes. Markets have been attempting to come to terms with lackluster EU-zone growth projections, undercapitalized banks, and (worst of all) structural contagion due to the spectre of sovereign default.

Here are the current major Equity indexes and their associated realized volatilities measured since August 1.

The results in column 1 were calculated independent of currency exposure, such that each volatility is based on index returns only. Column 2 index volatilities are measured from a USD perspective in that the results include the volatility of the index as well as the un-hedged currency exposure of a USD-based portfolio manager invested in each index. In all cases except for the FTSE 100, the un-hedged currency exposure is due to the EURUSD exchange rate (for the FTSE the exposure is due to GBPUSD rate).

Of startling note is the wide margin between the Euro-zone index volatilities and that of the UK-based FTSE-100. The decision by UK voters not not participate in the Euro is certainly presenting itself quite starkly in these statistics.

The results above were calculated using The RiskAPI Add-In, our unique software client which allows fund managers to access a whole spectrum of on-demand portfolio risk analysis calculations.

Earlier this year, the CME added a whole range of S&P E-mini sector index futures to their universe of available instruments. These contracts were created to provide a mechanism to directly hedge sector exposure according to the S&P Select Sector group of indices.

PortfolioScience has followed suit and introduced symbols for all CME S&P sector index futures contracts. With regards to current market conditions, the correlations of each of these sectors to the broader S&P 500 index are directly relevant. Currently, YTD correlation for each of the cash indices stands at:

Save for Energy and Utilities, most of these sectors are showing fairly high correlations to the market. This is likely a result of equities as an asset class suffering from systemic volatility due to the effects of the financial crisis rearing its head recently. Another useful analysis is the sector cross-correlations, which are presented below in the form of a correlation matrix. All calculations are using YTD data:

Using Excel's "conditional formatting" feature, the correlation matrix we initially generated using the RiskAPI Add-In was modified to highlight higher correlations in red and lower correlations in yellow. Note that Utilities (IXU) currently has the lowest cross-correlation of the group.

This week saw probably the largest one day move in a major currency in the last 20 years.

YTD realized volatility for USDCHF was at 12.99% as of Monday, September 5th. On Tuesday, September 6th, due to the SNB's announcement that it would purchase "unlimited quantities" of non CHF currencies to keep it at 1.20 (number of Swiss Franc per 1 Euro) or lower, the Franc experienced a devaluation of almost 9%. Quoted in Francs (USDCHF), the currency rate moved from 0.7865 to 0.8568.

To appreciate the magnitude of this one-day event, using YTD data, a single standard deviation represented a move of 0.81% in the USDCHF exchange rate. Tuesday's event resulted in a shift of 8.9%, equivalent to roughly TEN TIMES this amount.

Critics of G-7 central banking policies will, no doubt, jump on such data as proof that the stated mission of "price stability" is proving to be out of reach lately.

Current YTD realized volatility for USDCHF as of September 8th stands at 16.51%

The results above were calculated using The RiskAPI Add-In, our unique software client which allows fund managers to access a whole spectrum of on-demand portfolio risk analysis calculations.

Here are the current realized volatility values for the major precious metals:

Of note is the relatively low volatility of Platinum, which is most likely due to its lack of participation in the flight-to-quality/safe heaven trade resulting out of the US & EU debt crises.

The table above was calculated using The RiskAPI Add-In, our unique software client which allows fund managers to access a whole spectrum of on-demand portfolio risk analysis calculations.

Since July, the correlation of Gold to the S&P 500 index has fallen off a cliff. This behavior has highlighted the magnitude of the flight-to-safety trade that has propelled gold to record highs this summer. The chart below illustrates this dramatic de-coupling.

A common opinion held throughout QE1 & 2 was that equities were benefiting from an inflationary environment. This may be at an end:

The chart above was calculated using The RiskAPI Add-In, our unique software client which allows fund managers to access a whole spectrum of on-demand portfolio risk analysis calculations.

Here are the current most volatile stocks in the S&P 500:

Volatility is defined as the annualized standard deviation of lognormal returns. This is equivalent to realized volatility as defined by option traders. Calculations are all YTD, as of Aug 18th, 2011.

All of the above were calculated using The RiskAPI Add-In.

The events in the equity markets in the last 10 days have been nothing less than extraordinary, to say the least.Here are some stats on the S&P 500 Index prior to July 28th:

• YTD Return: 6.43%
• YTD Realized volatility: 13.05%
• YTD Correlation to gold: 0.05

Here are the same stats with data since 7/28 included.

• YTD Return: -6.49%
• YTD Realized volatility: 19.67%
• YTD Correlation to gold: -0.18

Very significant market impacts have taken place here.

All of the above were calculated using The RiskAPI Add-In.

Spot crude oil saw a very large move on August 4th. The previous close on the 3rd was $91.93. The market settled at $86.63. This represents a 5.76% move.Was this out of the ordinary?

Using 6 months of daily data, we calculated a one standard deviation move for spot crude oil as being $1.90 as of August 3rd. This translates into a 2.06% move. So, one can definitely conclude this recent event was out of the ordinary - a two standard deviation move would have been $3.80, while a three standard deviation move would have been $5.70. This means August 4th's drop was larger than 3 standard deviations! Make no mistake, this was a rare event.

Current 6-month realized volatility for spot crude oil as calculated by the RiskAPI system stands at: 36.30%. Current 95% confidence Value at Risk (VaR) using the same amount of data stands at $3.65. 99% VaR is at $5.16.

All of the above were calculated using The RiskAPI Add-In.