May 9, 2016

Russian Volatility Index

Moscow Exchange (after merger with RTS) has updated the methodology behind the benchmark index of Russian volatility. The new index is called RVI (RVI$ Index on Bloomberg) and is calculated using the same methodology as the VIX. Differences between the old and new index are explained on the exchange pages.

Index main. Methodology.

Sadly, there is no liquidity in the futures. I checked just a minute ago - only June expiration listed, volume 1 contract, open interest 2 contracts. May contract expired with open interest of only 136 contracts.

The index provides an interesting view of country-specific volatility during a time of a major warfare. The index' average level is about 30, about the same as the previous RTSVX index.

After Pro-Russian military forces seized control of Ukrainian Crimean peninsula, RVI did not react in a significant way. However the index spiked early in March 2014, probably after G8 members suspended preparations for the Sochi Summit. It seems that the market anticipated sanctions; but after spiking to 50s, index discounted the impact on economy and fell to 30s.

The currency market led the reaction to US and EU led sanctions on Russian attack on eastern Ukraine. In mid-december RVI spiked up again, to almost 100, mostly due to decline of Ruble, and actions of the Russian central bank.

At the time of writing is seems that even despite the war, despite all the sanctions, despite the decline in oil prices the index has stabilized at around 35 level - slightly elevated, but not a crisis level. RTSI Index is around multi-year lows, but after falling about 30% in December of 2014 has remained at around the same 800-900 level.

Thank you very much to reader Oleg P. who emailed me regarding the updated methodology.

2 comments:

  1. You're welcome!

    The Black Monday of 3/3/2014 orrured mostly because on Saturday 3/1/2014 parliament granted the president a permission to invade Ukraine. It was a full-scale war anticipation.

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  2. Thank you for this info, Oleg!

    ReplyDelete