August 2011
Intermediate to advanced
288 pages
6h 58m
English
Chapter 7
Alternate Equity Volatility and Strategy Indexes
In addition to the VIX, the CBOE calculates and publishes index data on a variety of volatility-related equity indexes. This chapter will give a quick overview of each of these equity-related volatility indexes along with a comparison of each to relevant markets.
The first index is an extension of the VIX that focuses on longer-dated options, and the result is a longer time horizon for implied volatility. After this index, the remaining indexes are based on a variety of strategies using VIX derivative instruments on a systematic basis. These indexes that represent a strategy will perform differently in different market environments. The result of studying the history of these indexes may be insight into the type of market environment that will benefit different systematic trading strategies. Also, due to the inverse relationship between the S&P 500 index and the VIX, the indexes described in this chapter have a pricing relationship to the S&P 500. These relationships are still developing, but it is starting to be interpreted by some traders as a market forecasting method.
CBOE S&P 500 3-MONTH VOLATILITY INDEX (VXV)
The CBOE S&P 500 3-Month Volatility Index® (VXV®) is similar to the VIX but with a longer time horizon. It was developed to determine implied volatility indicated by longer-dated S&P 500 index options. This index achieves this by focusing on calculating 93-day implied volatility. The calculation uses a combination ...
