CoachA volatility index is a published number that summarises the implied volatility of an index’s options for a fixed horizon, computed from option prices by a formula that uses no pricing model:
with the mid-quote of the out-of-the-money option at strike , the first strike at or below the forward , and the index equal to .
Voorbeelden
Example 25.9 (5 February 2018)
On Monday 5 February 2018 the S&P 500 fell 4% and the volatility index rose 20 points in the day. Exchange-traded products giving leveraged or inverse exposure to the front futures, with about $4 billion of assets at the end of 2017, had to rebalance at the end of the day, and, by the arithmetic of Proposition 14.10, both kinds had to buy futures after a rise. A central-bank analysis describes the resulting loop: their buying pushed the futures higher, which increased the amount they had to buy. The largest inverse product lost nearly all of its value in that session and was then terminated by its issuer.