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Mar 24

VIX calculation

Posted by abiao at 17:26 | Code » Matlab | Comments(2) | Reads(19435)
CBOE Volatility Index, VIX, was originally designed to measure the market’s expectation of 30-day volatility implied by at-the-money S&P 100 Index (OEX) option prices. Now VIX is used to reflect a new way to measure expected volatility, one that continues to be widely used by financial theorists, risk managers and volatility traders alike. The new VIX is based on the S&P 500 Index (SPX), the core index for U.S. equities, and estimates expected volatility by averaging the weighted prices of SPX puts and calls over a wide range of strike prices. By supplying a script for replicating volatility exposure with a portfolio of SPX options, this new methodology transformed VIX from an abstract concept into a practical standard for trading and hedging volatility.

Introduced by this paper http://www.cboe.com/micro/vix/vixwhite.pdf, VIX calculation is done step-by step as:
1), Select the options to be used in the VIX calculation;
2), Calculate volatility for both near-term and next-term options;
3), Calculate the 30-day weighted average of variance, then take the square root of that value and multiply by 100 to get VIX.

Matlab code: VIX

Tags: ,
Hey abiao,
it would really help me if u could send me the matlab code for the VIX calculation,
tank u verry mutch!

Igorarb, that code is not written by me, so I updated the link above where you can see directly the codes.
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