Increase in rupee volatility in Dec shows little signs of abating

Implied volatility over 3-month, 6-month period remains elevated

The expected volatility of the rupee, which had spiked this month, shows little sign of abating even as the currency hits new all-time lows.

 

The three-month and six-month implied volatility of the rupee both shot up to their highest in nearly a year in early December (chart 1). 

 

The sharp fall in the rupee in recent times has seen levels remain elevated.

 

Implied volatility is broadly the expected change in the rupee value over a given period.

 

The six-month implied volatility figure of over 4 per cent would suggest an equivalent change in rupee value over this