Standard & Poor's launches index series tied to VIX futures

By Devika Patel

Knoxville, Tenn., Jan. 22 - Standard & Poor's announced the launch of the S&P 500 VIX Futures index series, a suite of investable indexes that seek to model the outcome of holding a long position in VIX futures contracts.

The CBOE Volatility index (VIX) is a measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices.

The S&P 500 VIX Futures index series, developed in cooperation with Chicago Board Options Exchange, models returns from a long VIX futures position that is rolled continuously throughout the period between futures expiration dates.

The total return version of the indexes incorporates interest accrual on the notional value of the indexes and reinvestment into the indexes.

Interest accrues based on the three-month U.S. Treasury rate.

The S&P 500 VIX Futures index series has a negative correlation with equity markets.

The new index series is comprised of the S&P 500 VIX Short-Term Futures index and the S&P 500 VIX Mid-Term Futures index.

The S&P 500 VIX Short-Term Futures index measures the return from a daily rolling long position in the first- and second-month VIX futures contracts, resulting in a constant one-month maturity profile.

The S&P 500 VIX Mid-Term Futures index measures the return from a daily rolling long position in the fourth-, fifth-, sixth- and seventh-month VIX futures contracts, resulting in a constant five-month maturity profile.

"Indices comprised of futures contracts have been valuable in broadening access to alternative assets where the spot is difficult to trade," global head of research and design Srikant Dash said in a press release. "We expect the S&P 500 VIX Futures indices to do the same for volatility."

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.