Anatomy of the VIX spike in August 2024

Karamfil Todorov and Grigory Vilkov

No 95, BIS Bulletins from Bank for International Settlements

Abstract: On 5 August 2024, the Cboe volatility index (VIX) derived from option prices on the S&P 500 recorded its biggest ever one-day spike, increasing by 180% to almost 66 pre-market (ie before the US market open). In this Bulletin, we delve into this episode for clues to the possible reasons for the spike. Our analysis indicates that the asymmetric widening of bid-ask spreads likely played a key role in exacerbating the spike, as it lifted mid-quotes of option prices used in the calculation of VIX. Market makers’ (MMs) adjustment of quotes was behind the widening, as MMs sought to avert an imbalanced book in uncertain conditions.

Pages: 8 pages
Date: 2024-10-29
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