The Chicago Board Options Exchange (CBOE) has begun disseminating values for three new CBOE volatility indexes using the prices of CME Dollar/Euro, Dollar/British Pound and Dollar/Japanese Yen futures options.
The CBOE/CME FX Euro Volatility Index (EUVIX), the CBOE/CME FX British Pound Volatility Index (tBPVIX) and the CBOE/CME FX Yen Volatility Index (JYVIX) are the first benchmarks to track the volatility of foreign exchange (FX) futures options. The underlying options are the most liquid FX options traded at the CME, and in 2014, accounted for a combined 80 per cent of the over 15 million total currency options traded at CME.
"CBOE continues to broaden the scope of our highly popular volatility index franchise with foreign exchange volatility indexes, which offer investors the ability to measure pure FX volatility for the first time," CBOE Holdings CEO Edward Tilly says. "CBOE calculates values of volatility indexes for a variety of asset classes and we're pleased now to add some of the CME Group's most active FX futures options products, and look forward to offering trading of these new FX volatility indexes in the future."
Derivatives on foreign exchange constitute the second largest derivatives sector after interest rates. FX contracts account for approximately 10 per cent of open interest and also 10 per cent of total derivatives turnover. The increasing international diversification of asset portfolios has significantly increased trading of FX derivatives over the past few years, with average daily volume reaching $5.3 trillion per day in 2013. (BIS Triennial Survey 2013).
The value of each Index is derived from applying the proprietary CBOE Volatility Index (VIX) methodology to the CME Group's FX options on Dollar/Euro, Dollar/BP and Dollar/Yen futures.
CBOE, the leading exchange in the volatility space and the home of volatility benchmarks, strategies and products, now calculates and disseminates benchmark data on over three dozen different volatility-related products, including the widely followed CBOE Volatility Index (VIX), the leading barometer of investor sentiment and stock market volatility. In addition to its suite of benchmarks and strategies, volatility options and futures contracts on VIX can be traded at CBOE and CFE, respectively.
