For Institutional Investors Only

Information contained on this Website is published solely for general informative purposes and intended only for United States institutional investors, consultants, and financial advisers, and other intermediaries who are who are knowledgeable and experienced in the financial services market and in investment products of this nature. If you are a retail or individual investor then please leave this website immediately. The information is not authorized for use in a jurisdiction where distribution is not authorized and is not intended for distribution to retail clients. If you choose to access this Website from locations outside of the United States, you do so at your own initiative and risk, and are responsible for compliance with all applicable laws.

By accessing this site you confirm that you are an Institutional Investor, you agree not to forward or make the contents of this site available to any person who is not an Institutional Investor, and you agree to be subject to intechinvestments.com terms of use.


Redirect Me to JanusHenderson.com

Are You Vexed by the VIX®?

February 9, 2018

Topics: Blog

Posted by Valerie Azuelos

By Valerie Azuelos,
Managing Director

Have you ever tried to use the VIX® to monitor market risk? The CBOE volatility Index (VIX®) is a popular view of equity market volatility, but there are a couple things you should know about the VIX® before using it exclusively.

First, make sure your time horizon is aligned with the VIX®. The VIX® effectively averages the implied volatility of put and call options for the Standard & Poor’s 500 Index. Since options are inherently forward-looking, this may seem like a reasonable approach for understanding future volatility, however, the nominal time horizon is just one month ahead.

Second, and perhaps more importantly, it may not reflect the true potential of a tail-risk event. The VIX® is a consensus-based measure. That means it’s a lagging or, at best, a coincident indicator of what the broad market thinks; this limits its use as a tool for detecting bubbles of unjustified consensus.

Most conventional approaches to understanding market risk have more value in establishing the rate at which prices fluctuate at the present or during the recent past, rather than when a major market shock is likely to occur.

That’s why we’ve introduced the Intech Equity Market Stress MonitorTM.  The monitor is a collection of five metrics we believe are reliable indicators of equity market stress based on our 30-year history of studying stock price volatility. We believe these indicators are well suited to identifying signs of market stress. You can use the monitor to gain insight to market risk regimes, contextualize beta risk management and complement your conventional risk metrics.

Watch the interactive webinar here.

Learn more about the Intech Equity Market Stress MonitorTM. Download an eBook that serves as a guide to the monitor or our latest quarterly report that offers our analysis of the data. 

Download eBook Read Quarterly Report

 

VIX® is a registered trademark of the Chicago Board Options Exchange, Incorporated (“CBOE”). The VIX index methodology is the property of CBOE.

Subscribe to Email Updates