Case Study · A Fed Week
Free to readHow Much Was the Fed? — March 2023
During the March 2023 banking stress, implied vol was high into an FOMC meeting. The useful question wasn't "is vol high?" — it was "how much of it is the Fed, and how much is the banks?"
The March 2023 FOMC is the perfect case for event isolation, because two sources of volatility were stacked on top of each other: a genuine, ongoing banking scare (diffusive) and a high-stakes scheduled decision (the event). A single implied number couldn't tell them apart. The deconstruction could.
The setup
In the days after Silicon Valley Bank failed (March 10, 2023), implied vol on the index jumped as a real, unscheduled crisis played out — the kind of background fear that lives in the diffusive baseline. On top of that sat the FOMC decision of March 22: would the Fed keep hiking into a banking panic? That's a classic scheduled event. The reading was high for both reasons at once.
SVB fails; banking stress erupts. Diffusive baseline jumps — this is real, unscheduled fear, not a calendar event.
Crisis simmers into the meeting. Total implied is very high: elevated baseline plus a fat FOMC event chunk stacked on top.
Fed hikes 25 bp and signals caution. The event resolves; the FOMC chunk crushes out — but the baseline stays elevated because the banking story isn't over.
As stress fades, the baseline itself reverts. The two pieces normalize on different clocks.
Illustrative. Into the meeting, the reading was an elevated baseline plus a large FOMC chunk. After, the event chunk vanished — but the diffusive baseline stayed high because the banking stress was unscheduled and ongoing. Schematic, not a price chart.
What the deconstruction showed
The lesson is in the two clocks. Read as one number, March 2023 was just "high vol." Deconstructed, it was a high diffusive baseline (a real crisis) plus a fat event chunk (the Fed). Knowing the split told you what would happen on the 22nd: the FOMC premium would crush regardless of the decision, but the baseline wouldn't — because the thing driving the baseline wasn't on any calendar. Anyone who sold the whole reading as an "event crush" was short the wrong vol.
When a real crisis and a scheduled event overlap, only the event crushes on schedule. Isolating the two tells you which part of the premium is about to vanish and which part is here to stay.
This case study is free. To deconstruct around a live event you need the history — single names via ETF + Equities, full export via Everything.
See plans →Educational content from Nations Indexes. Event facts (the SVB failure on Mar 10, 2023 and the Mar 22, 2023 FOMC 25 bp hike) are historical and verifiable. The figure is an illustrative recreation, not a price chart, and nothing here is investment advice.