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The Cboe Volatility Index( the VIX Index) is widely regarded as a barometer of investor sentiment and market uncertainty. The VIX Index reflects expectations for nearterm volatility in the US equity market, derived from S & P 500 Index option prices. While market fluctuations are common, certain rare and extreme events— known as tail events— can trigger outsized reactions in volatility.
To help investors better understand how the VIX Index may respond to unexpected events, Cboe analysed a series of notable tail events over the past two decades. From geopolitical crises and financial system breakdowns to unexpected policy shifts and global pandemics, each catalyst has tested the resilience of markets and prompted sharp movements in volatility. Examining these episodes in detail provides greater insight into the dynamics of risk perception and the role of macroeconomic and geopolitical triggers in market volatility.
Volatility catalyst: 9 / 11 attacks The markets reopened after a four-day closure following the 9 / 11 attacks. When trading resumed, investors reacted to ongoing geopolitical unknowns, risks to national security and questions over economic fallout. In response to the 6.03 % S & P 500 Index decline, the Cboe Volatility Index( the VIX Index) increased 11.07 points from 33.87 to 44.94.
Volatility catalyst: Global financial crisis On 22 October 2008, turmoil in the global financial system— fueled by the ongoing credit crunch, investor panic after the Lehman collapse and deepening
How the Cboe Volatility Index Responds to Market Shocks:
Lessons from major tail events
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worries over bank solvency— triggered a sharp stock market sell‐off. Banks were hoarding capital and interbank lending dried up after Lehman’ s collapse in mid-September, freezing credit flows. While the $ 700 billion Troubled Asset Relief Program( TARP) passed in early October, markets feared it wouldn’ t be enough. Ongoing wavering over future rescue measures made systemic risk look far from contained. In response to the 5.7 % S & P 500 Index decline that day, the VIX Index increased 16.54 points from 53.11 to 69.65.
Volatility catalyst: Flash crash On 6 May 2010, the S & P 500 Index declined nearly 9 % intraday due to a large, automated sell order that triggered a cascade of high-frequency trading and liquidity withdrawal. In response to the 3.2 % close-to-close S & P 500 Index decline, the VIX Index increased 7.89 points from 24.91 to 32.80.
Volatility catalyst: Brexit On 24 June 2016, the unexpected“ leave” outcome in the immediate aftermath of the Brexit referendum triggered a 3.6 % S & P 500 Index decline. The VIX Index rose 8.5 points from 17.3 to 25.8.
Volatility catalyst: Covid-19 pandemic On 16 March 2020, the S & P 500 Index declined 12 % and tripped exchange circuit breakers on the rapid spread of Covid-19, which prompted lockdowns and economic shutdowns worldwide. In response, the VIX Index increased 24.9 points from 57.8 to 82.7.
24 // TheTRADE // Q3 2025