CBOE Volatility Index has biggest one-day drop since Aug 2011

Mon Dec 31, 2012 4:25pm EST

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Dec 31 (Reuters) - The CBOE Volatility Index, or the VIX, Wall Street's favored measure of anxiety, posted its biggest one-day decline since August 2011, as lawmakers closed in on a deal to avert the "fiscal cliff."

The VIX ended down 20.7 percent to 18.02, as the equity market rallied sharply on the last trading day of the year.

Volatility had been on the rise in recent days, as it appeared Washington would not be able to agree to a deal that would head off a series of $600 billion in automatic spending cuts and tax increases that would be expected to hurt the U.S. economy.

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California state worker Albert Jagow (L) goes over his retirement options with Calpers Retirement Program Specialist JeanAnn Kirkpatrick at the Calpers regional office in Sacramento, California October 21, 2009. Calpers, the largest U.S. public pension fund, manages retirement benefits for more than 1.6 million people, with assets comparable in value to the entire GDP of Israel. The Calpers investment portfolio had a historic drop in value, going from a peak of $250 billion in the fall of 2007 to $167 billion in March 2009, a loss of about a third during that period. It is now around $200 billion. REUTERS/Max Whittaker   (UNITED STATES) - RTXPWOZ

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