Research on the Development Trend and Application of VIX Index

Research Article
Open access

Research on the Development Trend and Application of VIX Index

Muhao Hu 1* , Gexuan Zhu 2 , Xinyu Wen 3
  • 1 University of Minnesota    
  • 2 New York University    
  • 3 University of Waterloo    
  • *corresponding author muhaohu1023@gmail.com
Published on 10 November 2023 | https://doi.org/10.54254/2754-1169/37/20231830
AEMPS Vol.37
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-83558-095-0
ISBN (Online): 978-1-83558-096-7

Abstract

This research paper focuses on providing a comprehensive understanding and introduction to the VIX index. The history of the VIX index, its applications, and related products are systematically analyzed. It also derives the formula for the VIX Index (the volatility index introduced by the CBOE) using the standard deviation formula. A detailed explanation includes example data using Excel to calculate the VIX index for a particular day, an analysis of the error scenarios generated, and ways to improve it. Studying the VIX index helps us better understand today's financial investment situation and analyze investments in a case with VIX index criteria.

Keywords:

VIX index, fear index, VIX interpretation, VIX algorithm derivation, example of algorithm

Hu,M.;Zhu,G.;Wen,X. (2023). Research on the Development Trend and Application of VIX Index. Advances in Economics, Management and Political Sciences,37,42-54.
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References

[1]. Kenton, W. (2023, April 30). S&P 500 index: What it's for and why it's important in investing. Investopedia. Retrieved May 4, 2023, from https://www.investopedia.com/terms/s/sp500.asp

[2]. Cboe Global Markets. About Us. (n.d.). Retrieved May 4, 2023, from https://www.cboe.com/about/#our-story

[3]. Brenner, M., & Galai, D. (1989). New Financial Instruments for Hedging Changes in Volatility. Financial Analysts Journal, 45(4), 61–65. http://www.jstor.org/stable/4479241 doi:10.2469/faj.v45.n4.61

[4]. "IFR report" (PDF). people.stern.nyu.edu. 1992. Retrieved 2020-02-26 .https://pages.stern.nyu.edu/~mbrenner/research/IFR_report_on_Brenner-Galai_Sigma_Index.pdf

[5]. Mehta, Salil (July 2015). "Volatility in motion" (blog). Statistical Ideas. Retrieved 26 February 2020 – via Statisticalideas.blogspot.com

[6]. Volatility in motion. Statistical Ideas. (n.d.). Retrieved May 4, 2023, from http://statisticalideas.blogspot.com/2015/07/volatility-in-motion.html

[7]. Team, T. I. (2022, November 10). The impact of China devaluing the yuan in 2015. Investopedia. Retrieved May 4, 2023, from https://www.investopedia.com/trading/chinese-devaluation-yuan/

[8]. Michael Carson and John Clark. (n.d.). Asian financial crisis. Federal Reserve History. Retrieved May 4, 2023, from https://www.federalreservehistory.org/essays/asian-financial-crisis

[9]. Hayes, A. (2023, March 28). What was Enron? what happened and who was responsible. Investopedia. Retrieved May 4, 2023, from https://www.investopedia.com/terms/e/enron.asp

[10]. Duca, J. V. (n.d.). Subprime mortgage crisis. Federal Reserve History. Retrieved May 4, 2023, from https://www.federalreservehistory.org/essays/subprime-mortgage-crisis

[11]. Kuepper, J. (2023, March 20). Cboe volatility index (VIX): What does it measure in investing? Investopedia. Retrieved April 14, 2023, from https://www.investopedia.com/terms/v/vix.asp

[12]. staff, S. T. (2008, March 10). In the midst of a financial meltdown. The Seattle Times. Retrieved May 4, 2023, from https://www.seattletimes.com/opinion/in-the-midst-of-a-financial-meltdown/

[13]. Reiff, N. (2022, October 30). How to use a VIX ETF in your portfolio. Investopedia. Retrieved April 14, 2023, from https://www.investopedia.com/investing/use-vix-etf-in-your-portfolio/

[14]. Schwab.com. (n.d.). Vix etfs: The Facts and Risks. Schwab Brokerage. Retrieved April 14, 2023, from https://www.schwab.com/learn/story/vix-etfs-facts-and-risks

[15]. Volatility index®methodology: Selected broad-based index, equity and ... (n.d.-b). https://cdn.cboe.com/api/global/us_indices/governance/Volatility_Index_Methodology_Selected_Broad_Based_Index_Equity_and_ETF_Volatility_Indices.pdf.

Cite this article

Hu,M.;Zhu,G.;Wen,X. (2023). Research on the Development Trend and Application of VIX Index. Advances in Economics, Management and Political Sciences,37,42-54.

Data availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

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About volume

Volume title: Proceedings of the 7th International Conference on Economic Management and Green Development

ISBN：978-1-83558-095-0(Print) / 978-1-83558-096-7(Online)
Editor：Canh Thien Dang
Conference website: https://www.icemgd.org/
Conference date: 6 August 2023
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.37
ISSN：2754-1169(Print) / 2754-1177(Online)

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References

[1]. Kenton, W. (2023, April 30). S&P 500 index: What it's for and why it's important in investing. Investopedia. Retrieved May 4, 2023, from https://www.investopedia.com/terms/s/sp500.asp

[2]. Cboe Global Markets. About Us. (n.d.). Retrieved May 4, 2023, from https://www.cboe.com/about/#our-story

[3]. Brenner, M., & Galai, D. (1989). New Financial Instruments for Hedging Changes in Volatility. Financial Analysts Journal, 45(4), 61–65. http://www.jstor.org/stable/4479241 doi:10.2469/faj.v45.n4.61

[4]. "IFR report" (PDF). people.stern.nyu.edu. 1992. Retrieved 2020-02-26 .https://pages.stern.nyu.edu/~mbrenner/research/IFR_report_on_Brenner-Galai_Sigma_Index.pdf

[5]. Mehta, Salil (July 2015). "Volatility in motion" (blog). Statistical Ideas. Retrieved 26 February 2020 – via Statisticalideas.blogspot.com

[6]. Volatility in motion. Statistical Ideas. (n.d.). Retrieved May 4, 2023, from http://statisticalideas.blogspot.com/2015/07/volatility-in-motion.html

[7]. Team, T. I. (2022, November 10). The impact of China devaluing the yuan in 2015. Investopedia. Retrieved May 4, 2023, from https://www.investopedia.com/trading/chinese-devaluation-yuan/

[8]. Michael Carson and John Clark. (n.d.). Asian financial crisis. Federal Reserve History. Retrieved May 4, 2023, from https://www.federalreservehistory.org/essays/asian-financial-crisis

[9]. Hayes, A. (2023, March 28). What was Enron? what happened and who was responsible. Investopedia. Retrieved May 4, 2023, from https://www.investopedia.com/terms/e/enron.asp

[10]. Duca, J. V. (n.d.). Subprime mortgage crisis. Federal Reserve History. Retrieved May 4, 2023, from https://www.federalreservehistory.org/essays/subprime-mortgage-crisis

[11]. Kuepper, J. (2023, March 20). Cboe volatility index (VIX): What does it measure in investing? Investopedia. Retrieved April 14, 2023, from https://www.investopedia.com/terms/v/vix.asp

[12]. staff, S. T. (2008, March 10). In the midst of a financial meltdown. The Seattle Times. Retrieved May 4, 2023, from https://www.seattletimes.com/opinion/in-the-midst-of-a-financial-meltdown/

[13]. Reiff, N. (2022, October 30). How to use a VIX ETF in your portfolio. Investopedia. Retrieved April 14, 2023, from https://www.investopedia.com/investing/use-vix-etf-in-your-portfolio/

[14]. Schwab.com. (n.d.). Vix etfs: The Facts and Risks. Schwab Brokerage. Retrieved April 14, 2023, from https://www.schwab.com/learn/story/vix-etfs-facts-and-risks

[15]. Volatility index®methodology: Selected broad-based index, equity and ... (n.d.-b). https://cdn.cboe.com/api/global/us_indices/governance/Volatility_Index_Methodology_Selected_Broad_Based_Index_Equity_and_ETF_Volatility_Indices.pdf.

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