Equity volatility index reflects investor outlook
Standard & Poor's (S&P) and the Australian Securities Exchange (ASX) are about to launch an equity volatility index that reflects investor sentiment about expected volatility in the S&P/ASX 200.
The S&P/ASX 200 VIX index commences tomorrow and S&P stated that it would reflect expected equity market volatility over the next 30 days. A high volatility level would indicate a market expectation of large changes in the S&P/ASX 200 and therefore investor uncertainty.
"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 ASX general manager, equity markets, Richard Murphy. "More specifically, because the S&P/ASX 200 VIX is a forward looking volatility measure, observers of the index will have insight into the degree of uncertainty among investors and their expectations regarding the magnitude of future movements in the local equity market."
S&P stated that the index would reflect expected equity market volatility over the next 30 days by using settlement prices for S&P/ASX 200 put and call options to calculate a weighted average of the implied volatility incorporated into the options. The calculations would use the Chicago Board Options Exchange (CBOE) proprietary methodology, which CBOE executive vice president Richard DuFour said had become the recognised standard for measuring implied volatility.
S&P stated that the S&P/ASX 200 VIX would initially be available as an end-of-day index from the ASX, although the ASX would consider making the index available in real-time and launching derivative products over the volatility index at a later date.
Recommended for you
Financial Services Minister, Stephen Jones, has assured the cost and time to enter the financial advice profession will soon be halved, as shadow treasurer Angus Taylor pledges to reach 30,000 advisers.
The positive results of the latest financial adviser exam have helped the advice profession reach 15,600 yet again, according to Wealth Data analysis.
Financial advice firms have told Adviser Ratings they are planning to increase their compliance spend by almost a third, including on enhancements to their cyber security which ASIC has identified as an enforcement priority.
The digital advice platform is officially launching into the financial advice sector, offering up its services to practices as a means of engaging with the next generation of clients.
