JFRM  Vol.2 No.1 , March 2013
Behind the Rejection of Alternative Measures of Implied Equity Volatility: A Note
Author(s) G. D. Hancock*
ABSTRACT

This note evaluates the risk-adjusted performance of the implied volatility of the NASDAQ index (VXN), Russell 2000 (RVX) and Dow Jones Industrial Averages (VXD). The results are compared to the performance of the implied volatility of the S & P 500 (VIX) in order to identify the unique contribution of each volatility index. Futures and option contracts have been offered on the VXD, VXN and RVX with results so dismal that the contracts were eventually delisted. In May 2012 futures were once again offered on the VXN but there is little market interest as indicated by the low trading volume. This note finds that the equity index implied volatility measures on VXN, RVX and VXD do not offer sufficient benefits beyond what investors can achieve with VIX which may explain, in part, the rejection of derivatives written on those measures of tradable implied index volatility.


Cite this paper
Hancock, G. (2013). Behind the Rejection of Alternative Measures of Implied Equity Volatility: A Note. Journal of Financial Risk Management, 2, 10-12. doi: 10.4236/jfrm.2013.21002.
References
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