Why is it in the news?
- India VIX, reflecting the market’s near-term volatility expectations, surged past the 21 mark.
Volatility Index
- The Volatility Index, also known as VIX or the Fear Index, serves as a metric to gauge the expected volatility in the market in the near future. Volatility refers to the speed and size of price fluctuations and is often associated with risk in the realm of finance.
- When the market experiences periods of volatility, characterized by significant upward or downward movements, the volatility index tends to increase. Conversely, as volatility diminishes, the Volatility Index decreases.
- The Volatility Index was initially introduced by the Chicago Board of Options Exchange (CBOE) in 1993, utilizing S&P 100 Index option prices as the underlying basis.
- In 2003, the methodology underwent revision, and the updated Volatility Index became based on S&P 500 Index options.
India VIX
- India VIX, an acronym for Volatility Index, is calculated by the National Stock Exchange (NSE) using the order book data of NIFTY Options.
- This index serves as an indicator of investor sentiment towards the market’s volatility in the short term, specifically reflecting the anticipated market volatility over the next 30 calendar days.
- According to the NSE, higher values of India VIX signify greater expected volatility, whereas lower values indicate the opposite.
