Wall Street uses a mathematical formula to measure fear
Finance
This mathematical gauge tracks how much investors are willing to pay for protection against market swings, effectively turning collective anxiety into a tradable commodity.
While most market indicators track what has already happened, the VIX looks forward by analyzing the prices of S&P 500 options. These are essentially insurance policies for investors; when people are nervous, the price of this insurance climbs, pushing the index higher. Created by the CBOE in 1993, the formula is so precise that it provides minute-by-minute quotes on the intensity of market panic.