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Thursday, July 26, 2007

VIX Index Surges to 13-Month High as Stocks Tumble Worldwide

See also Blogpost: VIX: Volatility Quietly Rising

" The benchmark for U.S. stock volatility surged to the highest in 13 months on concern higher borrowing costs will slow takeovers, spur debt defaults and curb earnings.

The Chicago Board Options Exchange Volatility Index jumped as much as 21 percent to 21.95, the highest since June 2006. Higher readings in the so-called VIX, derived from prices paid for options on the Standard & Poor's 500 Index, indicate traders expect bigger stock-market swings in the next 30 days.

"When it shoots up that means there's a great deal of uncertainty,'' said Michael Koskuba, who helps manage $59 billion at Victory Capital Management in New York. The S&P 500's decline of as much as 2.6 percent, the most in five months, is a ``pretty good jab to the ribs.''

Spikes in the VIX have coincided with stock-market declines. The index rose the most ever on Feb. 27, climbing 64 percent to 18.31, as the U.S. equity market suffered the worst rout in almost four years.

The VIX has come within 2 points of 50 on only three occasions in the past decade. The first, on Oct. 8, 1998, came as losses mounted from Russia defaulting on its debt. It reached another peak 10 days after the terrorist attacks in September 2001, and again surged in July 2002 as fallout from Enron Corp.'s collapse drove down shares of its main lenders and former rivals. "

Source: VIX Index Surges to 13-Month High as Stocks Tumble Worldwide (