Standard & Poor's (S&P) and the Australian Securities Exchange (ASX) have launched a new index measuring volatility in the local share market.
The S&P/ASX200 Vix is an end-of-day index reflecting investor sentiment about the expected volatility in the local benchmark, ASX200.
"The new volatility index will provide investors, financial media, researchers and economists with a means to gauge the level of volatility anticipated in the Australian equity market over the near term," said Richard Murphy, ASX general manager for equity markets. The version of the index is expected to be made available for use in derivative and structured products in the near future, he added.
The S&P/ASX200 Vix will reflect expected market volatility over the next 30 days by using settlement prices for S&P/ASX200 put and call options to calculate a weighted average of the implied volatility incorporated into the options. The calculation will use a proprietary methodology of the Chicago Board Options Exchange (CBOE).