VIX or Volatility Index
The VIX, or Volatility Index, is a measure of the expected volatility of the stock market over the next 30 days. It is calculated by taking the weighted average of the implied volatilities of a wide range of S&P 500 options. The VIX is often referred to as the “fear index” because it tends to rise when investors are fearful and fall when they are more confident. The higher the VIX, the greater the expected volatility in the stock market.
History of the VIX
The VIX was first introduced in 1993 by the Chicago Board Options Exchange (CBOE). It was designed to provide investors with a measure of the expected volatility of the stock market over the next 30 days. Since then, the VIX has become one of the most widely followed indicators of market sentiment. It is often used as a gauge of investor sentiment and can be used to help investors make decisions about when to enter or exit the market.
Comparison of VIX to Other Volatility Indices
| Index | Time Frame | Calculation |
|---|---|---|
| VIX | 30 Days | Weighted Average of Implied Volatilities of S&P 500 Options |
| VXV | 90 Days | Weighted Average of Implied Volatilities of S&P 500 Options |
| VXMT | 6 Months | Weighted Average of Implied Volatilities of S&P 500 Options |
Summary
The VIX, or Volatility Index, is a measure of the expected volatility of the stock market over the next 30 days. It is calculated by taking the weighted average of the implied volatilities of a wide range of S&P 500 options. The VIX is often referred to as the “fear index” because it tends to rise when investors are fearful and fall when they are more confident. For more information about the VIX, investors can visit the CBOE website or consult financial advisors.
See Also
- Implied Volatility
- Options
- S&P 500
- CBOE
- VXV
- VXMT
- Market Sentiment
- Risk Management
- Volatility Trading
- Options Trading
