|
A volatility index has been launched by the National Stock Exchange that would be reflecting the markets expectation of volatility over the near term, that is the next 30 day period. The Chairman of the market regulator, Securities and Exchange Board of India (SEBI), Mr. C B Bhave has launched the index named India VIX and said that it is capturing the implied volatility embedded in options prices. The sources informed that the index is launched based on the Nifty 50 Index Option prices.
While launching the new index, India VIX, Mr. Bhave said, "The advantage of measuring things is to first define them. The volatility index will increase the understanding among people. Once that happens, we will be ready to launch products based on it". The SEBI officials have stated that a volatility figure (percentage) is calculated from the best bid-ask price of Nifty 50 Options contracts (traded on the F&O segment of NSE), and the figure is indicating the expected market volatility over the next 30 days. The officials said that the India VIX index would increase simultaneously with the implied volatility. The officials added that the implied volatility as captured by the volatility index would refer to the implied risks, associated with the stock markets and not the size of the price swings. They said that when the market is range bound or has a mild upside bias, the volatility is globally observed to be typically low. They also said that though the high readings indicate a higher market place, the India VIX index can also be used as a investor indicator, as it spikes in the volatility index are associated with a market fall.
Commenting on the launching of India VIX, the Managing Director and CEO of NSE, Mr. Ravi Narain said, "The introduction of the index would add volatility as an asset class to the investors portfolio". He said that the investors could hedge their portfolios against volatility with an offsetting position in India VIX futures or options contracts. He also said that the implied volatility information that the index gives, can also be used in identifying mis-priced options. According to another senior official from NSE, "Greater the liquidity in the options segment, better the index. There are also plans to introduce an intra-day volatility index once this one finds acceptance among market participants". The official added that NSE is the first exchange to launch such volatility index in India.
|
|
|
|
|
| Posted : 4/10/2008 |
|
| Browse through Product Directory of JimTrade.com which offers an exhaustive data on Products of Services where as Suppliers Directory of JimTrade.com provides a detailed information on Suppliers of Services |
|
|
|
