VIX Volatility Index
Definition of 'VIX Volatility Index'
This index is often referred to as the fear index. It represents one measure of the market's expectation of stock market volatility over the next 30 day period. The VIX Index was introduced by Prof. Robert Whaley of Vanderbilt University in 1993.
The VIX is calculated and disseminated in real-time by the Chicago Board Options Exchange. It is a weighted blend of prices for a range of options on the S&P 500 index. On March 26, 2004, the first-ever trading in futures on the VIX Index began on CBOE Futures Exchange (CFE). As of February 24, 2006, it became possible to trade VIX options contracts. A few Exchange Traded Fund seek to track its performance. The formula uses a kernel-smoothed estimator that takes as inputs the current market prices for all out-of-the-money calls and puts for the front month and second month expirations. The goal is to estimate the implied volatility of the S&P 500 index over the next 30 days.
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