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

AAA

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.

INVESTOPEDIA EXPLAINS '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. CBOE Nasdaq Volatility Index - ...

    A measure of market expectations of 30-day volatility for the ...
  2. Australian Financial Markets Association ...

    The bank bill interest rate is the wholesale interbank rate within ...
  3. Kangaroo Bond

    A type of foreign bond that is issued in the Australian market ...
  4. AUD/USD (Australian Dollar/U.S. ...

    The abbreviation for the Australian dollar and U.S. dollar (AUD/USD) ...
  5. AUD (Australian Dollar)

    The currency abbreviation for the Australian dollar (AUD), the ...
  6. Aussie

    Slang term that is used to refer to the Australian dollar.
RELATED FAQS
  1. What developed countries have the greatest exposure to metals and mining?

    The developed countries with the most exposure to the metals and mining sector are Canada, Australia and the United States. ... Read Full Answer >>
  2. Do all international markets trade between 9:30am and 4pm local time?

    The New York Stock Exchange and Nasdaq both trade between 9:30am and 4pm Eastern Time. All major stock exchanges trade at ... Read Full Answer >>
Related Articles
  1. Options & Futures

    Market Volatility Strategy: Collars

    Find out which protective or bullish collar will result in your optimal risk/return level.
  2. Active Trading Fundamentals

    Tracking Volatility: How The VIX Is Calculated

    When market volatility spikes or stalls, newspapers, websites, bloggers and television commentators all refer to the VIX®. Formally known as the CBOE Volatility Index, the VIX is a benchmark ...
  3. Forex Education

    A Forex Trader's View Of The Aussie/Gold Relationship

    We look at why this relationship exists and how you can use it to produce solid gold returns.
  4. Options & Futures

    Introducing The VIX Options

    Discover a new financial instrument that provides great opportunities for both hedging and speculation.
  5. Options & Futures

    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.
  6. Mutual Funds & ETFs

    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.
  7. Forex Education

    The Australian Dollar: What Every Forex Trader Needs To Know

    With its unique relationship to the Japanese yen, the AUD is an important currency for FX traders.
  8. Mutual Funds & ETFs

    Understanding Volatility Measurements

    How do you choose a fund with an optimal risk-reward combination? We teach you about standard deviation, beta and more!
  9. Options & Futures

    The Volatility Index: Reading Market Sentiment

    Using the Volatility Index can be essential for investing success.
  10. Options & Futures

    Using The VIX For Shorting Opportunities

    Find out how to use this tool to identify opportunities.

You May Also Like

Hot Definitions
  1. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  2. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  3. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  4. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  5. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  6. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!