Aug 15, 2010

Week in Volatility

Markets fell this week, with S&P down almost 4% and STOXX falling 2.5%. VIX rose 4.5 points; Jan-11 up 2.1 points, Feb-11 up 1.7 points. The rise in long-term vol occurred overnight from Tue to Wed. STOXX did not fall as much as S&P, and rise in VSTOXX was also less pronounced - index up 2.26, and long-term futures up 1+ point.

What is really interesting is that while VIX and VSTOXX rose this week, other volatility indexes around the world fell. I did not have the time for thorough data analysis, but NSE India VIX index made an all-time low, closing at 16.74 on Fri, link. Keep in mind that the index was in existence for a relatively short time. I was able to put together two charts of Citi Asian volatility indexes (that have longer history than India VIX) and VIX.
Over the past five years most of Asian markets had higher implied volatility than the VIX.

However since the vol spike in May most Asian volatility indexes have declined much more than the VIX, closer to Apr low levels.

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