Chicago Board Options Exchange (CBOE) and CME Group have begun disseminating values for a new volatility benchmark index using futures options data on CME Group's 10-year US Treasury note contract.
The CBOE/CBOT 10-year US Treasury Note Volatility Index is the first volatility index based on US government debt to be calculated and disseminated by CBOE.
The index was developed with significant contributions from Antonio Mele and Yoshiki Obayashi of Applied Academics.
CBOE and CBOE Futures Exchange (CFE) plan to offer trading on the 10-year Treasury Volatility Index in the future.
"We're pleased to introduce an interest rate volatility index based on one of CME Group's most active interest rate options products," says CBOE executive vice president Richard DuFour. "Interest rate derivatives also represent the largest asset class in the over-the-counter market. The addition of the CBOE/CBOT 10-year US Treasury Note Volatility Index to CBOE's already extensive list of volatility-related indexes broadens and diversifies the scope of asset classes on which users can measure volatility."
"CBOE's VIX index is a world-renowned measure of implied volatility, and we are very pleased to collaborate with CBOE on the development of an index based on CME Group's highly liquid 10-year US Treasury note option contracts," says Derek Sammann, CME Group's senior managing director of interest rate and FX products. "We believe this CBOE/CBOT Volatility Index will serve as a strong benchmark to help our global customers manage their exposure to market volatility."
The value of the Index is derived from applying the proprietary CBOE Volatility Index (VIX) methodology to futures options data from CME Group's 10-year US Treasury note contract. In 2012, more than 56 million 10-year US Treasury Note futures options contracts changed hands at CME Group.
CBOE now calculates and disseminates benchmark data on over two dozen different volatility-related products, including the widely followed VIX, a 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.