Chicago Board Options Exchange has created a new benchmark volatility index – the CBOE Mid-Term Volatility Index (VXMT).
The index is a measure of the expected volatility of the S&P 500 Index over a six-month time horizon.
The index is calculated using the CBOE Volatility Index (VIX Index) methodology, applied to S&P 500 Index (SPX) options that expire six to nine months in the future.
As investors become more sophisticated in their understanding of volatility and their use of volatility products, the VXMT index offers a "macro" view of market risk, a view driven more by the perceived risk of broad economic factors and less by event risk. As a result, the VXMT index tends to move like the VIX index (0.91 correlation), but with lower volatility (55 per cent versus 116 per cent since January 2008).
The VXMT index joins CBOE's other S&P 500 Index volatility benchmarks – the CBOE Short-term Volatility Index, which measures nine days; the VIX index, which measures 30 days; and the CBOE 3-Month Volatility Index – to create a live, streaming representation of expected volatility at key points along the S&P 500 Index option term structure.
CBOE is disseminating VXMT Index values generally every 15 seconds during the trading day.