S&P/ASX 200 VIX (A-VIX)

DEFINITION of 'S&P/ASX 200 VIX (A-VIX)'

A real-time index that reflects investor expectations about volatility over the next 30 days in the S&P/ASX 200, the Australian benchmark equity index. Commonly referred to as the ASX VIX or A-VIX, the S&P/ASX 200 VIX is used mainly as a barometer of investor sentiment and market expectations. As with other volatility indices, a relatively high level of the A-VIX implies expectations for greater market volatility and reflects uncertain investor sentiment, while a lower A-VIX level suggests lower volatility expectations and greater investor confidence.

BREAKING DOWN 'S&P/ASX 200 VIX (A-VIX)'

The S&P/ASX 200 VIX gauges expected near-term market volatility in the Australian market, using mid prices for put and call options on the index to calculate a weighted average of the implied volatility of these options. The volatility index uses two maturities for these options, with the nearest maturity having at least a week until expiry. The volatility of the options closest to maturity is interpolated with that of the options farthest from maturity to derive a 30-day indication of expected volatility in the equity benchmark.

Like other VIX indices, the A-VIX displays a strong negative correlation with the underlying S&P/ASX 200 index, enabling market participants to position their portfolios for anticipated changes in volatility, whether higher or lower. The launch of S&P/ASX 200 VIX futures in October 2013 has further enabled traders and investors to trade expected changes in Australian equity market volatility with ease in a single transaction.

The S&P/ASX 200 index covers approximately 80% of Australian equity market capitalization, and is home to global mining giants such as BHP Billiton and Rio Tinto, as well as large banks like Commonwealth Bank Australia and ANZ Banking Group. The index had a 45% weight in financial stocks and a 17% weight in material stocks as of October 2013. ASX itself is a vertically integrated exchange group that is among the world’s top 10 in terms of market capitalization.

RELATED TERMS
  1. VIX - CBOE Volatility Index

    The ticker symbol for the Chicago Board Options Exchange (CBOE) ...
  2. VIX Option

    A type of non-equity option that uses the CBOE Volatility Index ...
  3. S&P/ASX 200 Index

    The benchmark stock index for the Austrailian markets. It was ...
  4. Implied Volatility - IV

    The estimated volatility of a security's price.
  5. Volatility Arbitrage

    Trading strategies that attempt to exploit differences between ...
  6. Volatility

    1. A statistical measure of the dispersion of returns for a given ...
Related Articles
  1. Trading

    Understanding the CBOE Volatility Index

    The VIX shows the market’s volatility expectations for the next 30 days.
  2. Trading

    Introducing The VIX Options

    Discover a new financial instrument that provides great opportunities for both hedging and speculation.
  3. ETFs & Mutual Funds

    The VIX: Using The "Uncertainty Index" For Profit And Hedging

    Learn the best ways to profit and hedge using the Chicago Board Options Exchange Market Volatility Index.
  4. Trading

    Volatility Index Uncovers Market Bottoms

    VIX can gauge when the market has hit bottom - a welcome sign of better things to come.
  5. Trading

    Volatility - The Birth Of A New Asset Class

    Learn more about the trading possibilities with the VIX.
  6. Markets

    Determining Market Direction With VIX

    The CBOE's volatility index is a helpful market indicator. Learn how it can gauge the mood of the stock market.
  7. Markets

    The Volatility Index: Reading Market Sentiment

    Using the Volatility Index can be essential for investing success.
  8. ETFs & Mutual Funds

    Assessing The VIX in Q1 2016

    Discover how the VIX Index, or "fear gauge," began 2016 above the historical mean, and learn how this relates to past spikes in volatility.
  9. Markets

    3 Reasons to Ignore Market Volatility (VIX)

    If you can keep your head while those about you are losing theirs, you can make a nice return in roiling markets.
  10. ETFs & Mutual Funds

    Top 3 Inverse Volatility ETFs (XIV, SVXY)

    Learn about four inverse volatility ETNs and ETFs, and understand how the CBOE VIX indicator is calculated and used to hedge a portfolio.
RELATED FAQS
  1. What is the CBOE Volatility Index? (VIX)

    Find out why investors and analysts use the Chicago Board Options Exchange Volatility Index, or VIX, to measure the market's ... Read Answer >>
  2. What is the relationship between implied volatility and the volatility skew?

    Learn what the relationship is between implied volatility and the volatility skew, and see how implied volatility impacts ... Read Answer >>
  3. Which market indicators reflect volatility in the stock market?

    Learn the most commonly used technical indicators of stock market volatility that are watched by stock market traders and ... Read Answer >>
  4. What are the most effective hedging strategies to reduce market risk?

    Learn about different hedging strategies to reduce portfolio volatility and risk, including diversification, index options ... Read Answer >>
  5. How does implied volatility impact the pricing of options?

    Learn about two specific volatility types associated with options and how implied volatility can impact the pricing of options. Read Answer >>
  6. What is an option's implied volatility and how is it calculated?

    Learn what implied volatility is, how it is calculated using the Black-Scholes option pricing model and how to use a simple ... Read Answer >>
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center