We think you have liked this presentation. If you wish to download it, please recommend it to your friends in any social system. Share buttons are a little bit lower. Thank you!
Presentation is loading. Please wait.
Published byMarina Holmes
Modified over 2 years ago
But all of them seek one thing above all else: Clarity. In this lesson, I will try to provide clarity on the India Volatility Index or India Vix in short. Some people enjoy dancing in the rain but some really hate getting drenched. Some people enjoy the stock market volatility but some get killed by the same volatility. Different people view the same thing differently. Copyright © 2009
Understanding Volatility Index – By Prof. Simply Simple TM First of all, Volatility denotes the extent to which the value of our investment may be subject to the mood of the market over a given period of time. In other words, volatility refers to the amount of uncertainty or risk about the size of changes in a security's value. Commonly, it is observed that the higher the volatility, the riskier the security. Copyright © 2009
A volatility index tells us about the market expectations over the short term, usually a month. It tries to capture the sentiments of the market whether the market is in a complacent or anxious mood. Volatility is what makes our short-term investments look more dangerous than our long-term investments. So what is Volatility Index? Copyright © 2009
Some investors feel that surviving short-term market volatility is more challenging than surviving in the long run.
Volatile markets can turn upside down in very quick time. In fact, John Maynard Keynes himself once said that markets can remain irrational longer than you can remain solvent. So every now and then, we may see investors getting caught on the wrong side of market irrationality. A volatility index captures implied volatility in the market. Now… Copyright © 2009
Implied volatility draws its conclusions from the present pricing of options and not from historic volatility figures. It is expressed in terms of a percentage like 20%, 30%, etc. In a range-bound market, where prices are moving gradually, the volatility index remains low. It is believed that when the volatility index is less than 20%, the market is in a complacent mood and is not expecting any catastrophe. Okay, so how does it work? Copyright © 2009
A low volatility index is therefore, associated with price rise. But when the volatility index is greater than 30%, then the market is in the fear zone. A high volatility index is associated with a fall in market prices. In this manner, a volatility index helps investors gauge the mood of the market. Now… Copyright © 2009
India Vix is the first volatility index launched in India by the National Stock Exchange. For your additional information, the Chicago Board of Options Exchange (Cboe) introduced the first volatility index for the US markets in Cboe Vix uses the Standard and Poors 500 Index Options for calculating implied volatility, which is reflected by the changes in pricing of options. India Vix is based on the Nifty 50 Index Option prices. So what is the India Volatility Index? Copyright © 2009
It calculates the percentage of volatility by using a detailed computational methodology which relies on the best bid and offer price of the Nifty 50 index call and put options. Other than gauging the mood of the stock market, a volatility index can also be used to design derivative products in which the volatility index is used as an underlying asset. Investors who are averse to volatility can hedge their portfolio by purchasing derivative products based on the volatility index. Okay, so how does it work? Copyright © 2009
And investors with a good appetite for volatility can take the risk by selling the same derivatives product. All in all, a volatility index provides a new game of hedging and trading for market participants. But how is hedging through volatility index derivatives different from hedging through single stock or index derivatives? Well, hedging through single stock or index derivatives is like purchasing a comprehensive insurance which covers many risks that you may not be even aware of. But a derivative product based on volatility index keeps its focus narrowit provides a hedge against only market volatility. Copyright © 2009
So if the prices of your companys shares are likely to fall due to poor quarterly results, then purchasing volatility index derivatives may not protect you. The market may remain calm even though your own individual portfolio may be performing badly. But if the prices of your stocks are likely to fall due to poor market sentiments and not due to any company- specific reason, then a volatility index derivative may be your right bet. Finally… Copyright © 2009
To Sum Up What: Volatility index measures implied volatility in the market over the short term, usually a month. India Vix is the first volatility index launched by the National Stock Exchange. How: India Vix calculates volatility by computational methodology, which relies on the best bid and offer price of the Nifty 50 index call and put options. What: Volatility index can also be used for designing derivative products in which the volatility index is used as an underlying asset. Copyright © 2009
Hope you have now understood the concept of Volatility Index Do write to me at
The. of and a to in is you that it he for.
We all know that bonus shares exist. But why are they issued in the first place? Let me try & simplify this for you… Why Are Bonus Shares Issued? – By.
We normally hear of promoters raising capital by issuing shares in the market. Understanding Buyback of Shares – By Prof. Simply Simple TM.
Of. and a to the in is you that it at be.
The. of and a to in is you that it he was.
© 2012 VSA, LP Valid only if used prior to January 1, The information, general principles and conclusions presented in this report are subject to.
Understanding Weather Derivatives – By Prof. Simply Simple TM In the last few years, the monsoons have played truant with us on more than one occasion.
High Frequency Words List A Group 1. the of and.
Time Value of Money – By Prof. Simply Simple Some people put their money in a bank account; some make investments in stocks and bonds. Different people.
The Pricing Of Risk Understanding the Risk Return Relation.
Rising interest rates come as bad news for those who wish to take a home loan or a car loan. However, rising interest rates bring several opportunities.
In the name of god Valuing Bonds Lecturer : DR. Ramzani By : Nikoo Ahmad fallahi 1 tasmimgiri dar masael mali.
Dolch Words the of and to a in that is was.
Can you see?. I like him. When will we go? All or some.
Zurich Bank International Structured Deposits Q & As.
LIBOR Finance 101. Finance Finance deals with the concepts of time, money, risk and how they are interrelated It also deals with the task of providing.
Infinitely repeated games The concept of present value (see pp.14-18): Profit today is more valuable than profit one year from today. The present value.
Time to Invest in Short-Term Bonds? First Quarter 2010.
For the last couple of months, the term sweat equity has been in the news. In the recently concluded IPL3, this term acquired immense news coverage. But.
Tips to Build a Successful Organization. To be a successful Sponsor and leader you should perform the following responsibilities: Give regular retail.
An Initiative by Go4Advisory, Powered by ProfitGyan.com Client Services Presentation.
The Money Market – By Prof. Simply Simple The Money Market is a place for large institutions and the government - to manage their short term cash needs.
From risk to opportunity Lecture 12 John Hey and Carmen Pasca.
Chapter 11SectionMain Menu Saving and Investing How does investing contribute to the free enterprise system? How does the financial system bring together.
Short-Run Exchange Rate Determination Issues in Global Trade & Finance Prof. Bryson.
High-Frequency Phrases First 100 Words. The people.
The Kyscope A kaleidoscope for assessing business income taxation options Press the slide show button in the bar below this slide, sit back and watch the.
Production and Cost Analysis: Part I Chapter 9. Introduction In the supply process, households first offer the factors of production they control to the.
Money, Banking & Finance Lecture 2 The Stock Market, Rational Expectations and Efficient Markets.
© 2016 SlidePlayer.com Inc. All rights reserved.