Aug 18, 2010

AlphaShares China Volatility Index

There is a (relatively) new volatility index, that I think does not get as much attention as it should - the AlphaShares China Volatility Index, ASCNCHIX, or CHIX. I won't pretend to be an economist, but Chinese volatility is an important factor to consider for all traders and investors. The index is also interesting because it is actually composed of two underlying indexes.

The description on Bloomberg website here is actually somewhat misleading: "The AlphaShares Chinese Volatility Index measures the implied volatility of options on the FTSE Xinhua China 25 and Hang Seng (HSI) indices." In a private email Alphashares representative explained that the index is an equal-weighted average of  ATM volatilities of FXI ETF (US) and HSI (HK) .

Over the last five years VIX and CHIX moved in tandem, with CHIX about 1.5 times the VIX. However in the last 3 months this ratio fell below 1, with CHIX trading below VIX.

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