Glossary: terms starting with V
29 terms from Value at risk to VX30, briefly explained and with a source where possible. All terms from A to Z
- Value at risk (VaR)
Loss that will not be exceeded over a period with a chosen probability (such as 95%).
Example: $100,000, 0.5% expected monthly return, 4% volatility: VaR 95% ≈ $6,079.
More: Value at risk and conditional VaR: how much you could lose in a bad case
- Value investing (Value investor, Graham-Dodd investing, Value strategy)
Investment style that buys securities below their estimated intrinsic value, with a margin of safety as a buffer against errors. Founded by Benjamin Graham and David Dodd; Warren Buffett extended it to include the quality of the business. In factor models, its closest equivalent is the HML factor.
Source: Graham and Dodd (2008); Graham (2003)
More: Legendary investors: the investment styles of the most famous investors, from Graham to Simons
- Value premium (Value effect)
Excess return of cheaply valued stocks over expensive ones. It was substantial for decades, but was absent for a long stretch of the 2010s.
Source: Fama and French (1992); Asness et al. (2013)
More: Factor investing: understanding the Fama-French factors
- Value stock (Value share)
Stock with a low valuation relative to book value, earnings or dividends. Often mature companies in sectors such as banking, energy or industrials.
More: Factor investing: understanding the Fama-French factors
- Vanna and volga (Vanna, Volga, Vomma)
Second-order Greeks: vanna measures how delta changes with volatility, volga how vega changes with volatility. Important for far out-of-the-money options and for exotics whose price depends heavily on the smile.
Methodology: Option pricer: how Portfolio Lab values options
- Variance
Average squared deviation from the mean; its square root is the standard deviation, or volatility.
- Variance ratio (Variance ratio test, Lo-MacKinlay test)
The ratio of the variance of multi-period returns to k times the variance of single-period returns. For a random walk it is 1; values above point to trends, values below to mean reversion.
Source: Lo and MacKinlay (1988)
Methodology: Asset analysis: methodology from correlation to cointegration
- Variance risk premium
Difference between implied and subsequently realized variance. It is positive on average: investors pay more for protection against volatility than volatility costs on average.
Source: Carr and Wu (2009); Bollerslev et al. (2009)
More: VIX: how to read the stock market's fear gauge · Methodology: Volatility dashboard: methodology
- Variation margin (VM, Variation margin payment)
The daily cash settlement of gains and losses on futures and centrally cleared derivatives. Unlike initial margin, which remains posted as collateral, it flows out immediately. A loss on an overlay therefore has to be paid from cash, even if the hedged portfolio is gaining on paper.
Source: BCBS, CPMI and IOSCO (2022)
- Vega
Sensitivity of an option price to implied volatility: gain or loss per percentage point change in volatility. Option buyers are long vega, sellers are short.
More: Option pricing: where fair option prices come from · Methodology: Option pricer: how Portfolio Lab values options
- Venture debt (Venture lending, Growth debt)
Loans to start-ups that already have venture capital backing, usually with warrants on shares as additional compensation. Lenders rely less on ongoing cash flows than on realizable collateral such as patents and on the equity investors providing follow-on funding.
Source: Hochberg et al. (2018)
- Vintage year (Vintage, Fund vintage, Launch year)
The year assigned to a private markets fund; depending on the source, the year of its first capital call, its first investment or its final close. Funds of the same vintage invest in the same market environment and are therefore compared with each other; with commitment pacing, a new vintage is added every year.
More: Takahashi-Alexander model: forecasting the cash flows of private markets funds
- Viterbi algorithm (Viterbi path, Viterbi)
Uses dynamic programming to find the single sequence of hidden states with the highest joint probability, given all observations. Because it uses the entire series, the Viterbi path is a look back; only the filtered probability is suitable for trading rules.
Source: Viterbi (1967)
More: Regime models: hidden Markov, Markov switching and more · Methodology: Regime methodology: how the hidden Markov model works
- VIX (Fear gauge, Fear index)
Index of the expected volatility of the S&P 500 over the next 30 days, derived from option prices. A VIX of 20 corresponds to about 5.77% volatility per month.
- VIX future
Future on the VIX with monthly expiry. Its price reflects the expected implied volatility on the expiry date; ETFs and ETNs on short-term VIX futures lose over the long run through rolling in contango.
Source: Whaley (2013)
More: VIX: how to read the stock market's fear gauge · Methodology: Volatility dashboard: methodology
- VIX futures basis (VIX basis, VIX contango)
The gap between a VIX future and the VIX. A positive gap (contango) is the normal case; according to research, the gap predicts the futures' subsequent returns rather than the movement of the VIX.
Source: Simon and Campasano (2014)
- VLCC (Very large crude carrier, Supertanker, ULCC)
Very large crude carrier: a very large crude oil tanker with room for about 1.9 to 2.2 million barrels; ULCCs are larger still. Portfolio Lab classifies tankers of 320 m length or more as VLCCs, because the deadweight is not included in AIS.
Source: EIA (2014); Notteboom et al. (2026)
More: Ship tracking data and satellite images: what they reveal about commodities · Methodology: Ships at chokepoints (beta): methodology
- Volatility
Standard deviation of returns, usually annualized. The most widely used measure of fluctuation risk.
- Volatility barometer (Vol barometer, Volatility index barometer)
Portfolio Lab's own index from 0 (very calm) to 100 (stress), built from seven components such as the VIX, the term structure, realized volatility and the decline from the 52-week high. Each component counts as a percentile rank over the last three years; the barometer is their average.
- Volatility clustering
Calm and turbulent phases cluster: large price moves tend to be followed by large ones, small moves by small ones. That is why volatility can be forecast fairly well in the short term, while direction cannot.
Source: Engle (1982); Cont (2001)
- Volatility decay (Beta slippage, Leverage decay, Leveraged ETF decay)
The loss in value of daily leveraged or inverse funds caused by volatility without a trend, roughly the factor exp(−L × (L − 1) / 2 × σ² × T). An amplified form of volatility drag.
Example: Index unchanged after one year, volatility 25%: 2x −6.06%, 3x −17.10%.
Source: Avellaneda and Zhang (2010)
More: Leveraged ETFs and return stacking: how they work, long holding periods, costs and research
- Volatility drag (Variance drain, Variance drag)
The gap between arithmetic and geometric return, approximately half the variance. High volatility slows wealth growth even when the average return stays the same.
Example: An arithmetic 8% at 20% volatility: geometric about 8% − 0.2² / 2 = 6%.
- Volatility harvesting (Shannon's demon, Rebalancing return)
Additional growth from diversifying across volatile, not perfectly correlated assets and systematically rebalancing to fixed weights. It is not a higher arithmetic return but an effect of compounding; Chambers and Zdanowicz (2014) counter that it does not raise the expected value and that any benefit of rebalancing comes from mean reversion.
Source: Bouchey et al. (2012); Chambers and Zdanowicz (2014)
- Volatility risk premium
Difference between priced-in (VIX) and actually realized volatility. Usually positive: on average, protection costs more than it pays out.
- Volatility smile (Volatility skew, Vol smile)
Implied volatilities across the strike prices of one maturity. For equity indices, far out-of-the-money puts are considerably more expensive than calls (skew). The market expects crashes more than upward jumps.
Source: Gatheral (2006)
More: VIX: how to read the stock market's fear gauge · Methodology: Option pricer: how Portfolio Lab values options
- Volmageddon
Nickname for February 5, 2018: the VIX rose by 20 points, more than on any single day since the 1987 crash, and products that bet daily against VIX futures collapsed. Because leveraged and inverse products had to buy futures shortly before the close, they amplified the rise; the inverse product XIV lost 84% and was shut down.
Source: BIS (2018); Augustin et al. (2021)
More: Tail hedging: what put protection costs, when it pays off and what short-vol strategies teach
- VVIX
Volatility of the VIX itself, calculated from options on the VIX. Shows how expensive protection against VIX spikes is; typically 80 to 120.
- VWAP (Volume-weighted average price, VWAP algorithm)
Volume-weighted average price: the average price of all trades over a period, weighted by volume, i.e. the sum of price times volume divided by volume. A common benchmark for execution costs and the name of an algorithm that trades according to the volume profile.
Example: Trades of 10,000 shares at $50 and 30,000 shares at $51: VWAP = (500,000 + 1,530,000) / 40,000 = $50.75.
Source: Berkowitz et al. (1988)
More: Order types and execution: from limit orders to MOC, VWAP, TAS and BTIC
- VX30 (30-day VIX future, Constant-maturity VIX future)
A synthetic VIX future with a constant 30 days to expiry, interpolated linearly between the first and second monthly contracts according to days to expiry. VX30 / VIX − 1 is the roll yield relative to the VIX.
Brief, simplified explanations; not investment or tax advice.