The development of volatility index in major overseas markets can be simply divided into three stages:
The first stage is mainly the pioneering development of the American market. After more than ten years (1993 ~ 2006), the VIX Volatility Index (1993) was first introduced in the American market, and then the compilation method of the Volatility Index was updated (2003), and then the Volatility Index Futures (2004) and Volatility Index Options (2006) were successively introduced.
The second stage is mainly the follow-up development of the European market: the European Futures Exchange launched the STOXX50 Volatility Index in 2005, and launched the corresponding futures and options products in 2009 and 20 10 respectively.
In the third stage, mainly since 2006, major Asian markets have successively launched the volatility index corresponding to the core index of local exchanges, among which Indian, Korean, Japanese, China and Hongkong have successively launched the corresponding volatility index derivatives after 20 10 to help investors better manage risks.
Development of European and American markets
As we mentioned at the beginning, the VIX was first born in CBOE in 1993. In 2003, CBOE introduced a new method to compile the volatility index. Based on the market price of S&P 500 index options, the new algorithm replaces the previous index calculation method with VarianceSwap method, and the volatility calculated by the old method is renamed VXO.
CBOE traced the historical data of VIX index to 1990, traced the historical data of VXO index to 1986, and released the VXO and VIX index data at the same time. Judging from the operation data of VIX index, its fluctuation range is between 10 and 30 most of the time. In terms of extreme value, VIX index once broke through 80 points during the financial crisis in 2008, approached 50 points again during the European debt crisis in 20 10, and then broke through 50 points twice in August 20 15 and February 20 18. The development of VIX index not only provides investors with the function of observing market sentiment and predicting risks, but also provides guidance for the government to issue macro-control policies. During the outbreak of the global financial crisis in 2008, the U.S. government included the VIX index in the reference index before introducing the key rescue policy.
In April 2005, the European market released the 30-day volatility index VSTOXX based on EUROSTOXX. This index is based on the real-time trading data of EUREX's EUROSTOXX50 stock index options, and its calculation method is similar to that of VIX index, except that the contract selection and screening rules are adjusted. According to the operation data of VSTOXX index, its fluctuation range is between 10 and 40 most of the time.
From the extreme point of view, the VSTOXX index reached its maximum value of 87.5 1 point during the financial crisis on June 6, 2008, and climbed to nearly 70 points during the European debt crisis on June 20 10. During the 20 10 European debt crisis, the trend of VSTOXX index also provided a reference for the process of EU's rescue of the Greek government.
Development of Asian market
Taiwan Province Futures Exchange is the first Asian market to launch volatility index. Taiwan Province Weighted Index (TWSE) is its tracking index, which was launched in 2006. Except that the risk-free interest rate adopts the local market index, the compilation method is completely consistent with CBOE method. The Taiwan Stock Exchange also published the volatility index calculated by the new method and the old method.
Subsequently, the markets of India, South Korea, Japan and Hong Kong successively launched the volatility index with its own core index as the tracking target. Most of the index compilation principles and formulas in the above markets are basically similar to VIX introduced in the US market. Only the National Stock Exchange of India has adjusted the algorithm according to the order structure of Nifty option, and the main difference between them lies in the setting of extension period and the choice of risk-free interest rate. Judging from the operation of various volatility indexes in Asian markets, it is basically similar to the data in European and American markets, rising rapidly during the crisis and maintaining a relatively stable fluctuation level at other time points.
To sum up, judging from the development history of volatility index in major overseas markets, the development of volatility index and its derivatives provides investors with a good tool to observe market sentiment and risk management, and also provides an important reference for macro-decision-making by regulatory authorities. For China's capital market, we can learn from the experience of overseas leading markets according to our own late-developing advantages. In order to help investors manage risks better, we should vigorously introduce and develop index options, and further introduce volatility index and its derivatives on this basis. This is a development path worthy of our reference.