Term Structure of Volatility
Term Structure of Volatility — How IV varies across expiries — front vs back month regimes.
Definition
Term Structure of Volatility refers to how IV varies across expiries — front vs back month regimes. Keep that definition fixed when comparing series, managers, or regimes — renaming the same tape does not create a new signal.
Why it matters
Options and futures embed views on vol, skew, and path that cash markets only hint at. When how IV varies across expiries — front vs back month regimes shifts, related hedges, limits, and narratives usually need an explicit update rather than a quiet assumption.
Case
Suppose a desk is positioned for the opposite of what term structure of volatility is saying. If how IV varies across expiries — front vs back month regimes moves against that book, the first question is not “is the story clever?” but whether size, hedges, and stop logic still match the observation.
How to read it
State the expiry and Greek exposure; unmarked vol or pinning effects rewrite the thesis. Prefer a short written null hypothesis for Term Structure of Volatility: what would falsify the current reading in the next window?