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The S&P/ASX200 VIX (A-VIX) is a financial market product that participants trade based on the market price of the implied volatility in the underlying Australian equity index.
The A-VIX is a market instrument pricing investor sentiment and market expectations. A relatively high A-VIX value implies that the market expects significant changes in the S&P/ASX 200 over the next 30 days, while a relatively low A-VIX value implies that the market expects minimal change. The ASX chart below illustrates this relationship.
Similarly, when the A-VIX is at relatively high levels, investor sentiment prices in high uncertainty.
Conversely, when the A-VIX is at relatively low levels, it implies low uncertainty.
Instruments such as the A-VIX are often perceived to show characteristics of mean reversion by oscillating around a long-term average (or mean). In other words, a move away from the long-term average towards high or low extremes is usually followed by a move back towards the long-term average.
The implication is that high levels of volatility may be followed by a return to more normal volatility levels, and low levels of volatility may be precursors to an increase in volatility.
The A-VIX is reported as an annualized standard deviation percentage that can be converted to a shorter time period. For instance, an A-VIX value of 20% can be converted to a monthly figure, remembering that volatility scales at the square root of time, the formula is:
20% x √1/12 = 5.77%
In the above example, index options over the S&P/ASX 200 are incorporating the potential for a one standard deviation return over the next month of +/- 5.77%.
The S&P/ASX 200 VIX Futures (A-VIX futures) is an exchange-traded tool available on ASX designed specifically to manage and trade anticipated changes in Australian equity market volatility in a single transaction. Refer to ASX for an ASX VIX Futures fax sheet. [1]
With S&P/ASX 200 VIX Futures you can more easily hedge, trade and arbitrage anticipated volatility in the Australian equity market. Other uses include:
For example:
This article has multiple issues. Please help
improve it or discuss these issues on the
talk page. (
Learn how and when to remove these template messages)
|
The S&P/ASX200 VIX (A-VIX) is a financial market product that participants trade based on the market price of the implied volatility in the underlying Australian equity index.
The A-VIX is a market instrument pricing investor sentiment and market expectations. A relatively high A-VIX value implies that the market expects significant changes in the S&P/ASX 200 over the next 30 days, while a relatively low A-VIX value implies that the market expects minimal change. The ASX chart below illustrates this relationship.
Similarly, when the A-VIX is at relatively high levels, investor sentiment prices in high uncertainty.
Conversely, when the A-VIX is at relatively low levels, it implies low uncertainty.
Instruments such as the A-VIX are often perceived to show characteristics of mean reversion by oscillating around a long-term average (or mean). In other words, a move away from the long-term average towards high or low extremes is usually followed by a move back towards the long-term average.
The implication is that high levels of volatility may be followed by a return to more normal volatility levels, and low levels of volatility may be precursors to an increase in volatility.
The A-VIX is reported as an annualized standard deviation percentage that can be converted to a shorter time period. For instance, an A-VIX value of 20% can be converted to a monthly figure, remembering that volatility scales at the square root of time, the formula is:
20% x √1/12 = 5.77%
In the above example, index options over the S&P/ASX 200 are incorporating the potential for a one standard deviation return over the next month of +/- 5.77%.
The S&P/ASX 200 VIX Futures (A-VIX futures) is an exchange-traded tool available on ASX designed specifically to manage and trade anticipated changes in Australian equity market volatility in a single transaction. Refer to ASX for an ASX VIX Futures fax sheet. [1]
With S&P/ASX 200 VIX Futures you can more easily hedge, trade and arbitrage anticipated volatility in the Australian equity market. Other uses include:
For example: