Volatility Index is a measure of market’s expectation of volatility over the
near term. Volatility is often described as the “rate and magnitude of changes
in prices” and in finance often referred to as risk. Volatility Index is a
measure, of the amount by which an underlying Index is expected to fluctuate, in
the near term, (calculated as annualised volatility, denoted in percentage e.g.
20%) based on the order book of the underlying index options.
India VIX is a volatility index based on the NIFTY Index Option prices. From the
best bid-ask prices of NIFTY Options contracts, a volatility figure (%) is
calculated which indicates the expected market volatility over the next 30
calendar days. India VIX uses the computation methodology of CBOE, with suitable
amendments to adapt to the NIFTY options order book using cubic splines, etc.
* “VIX” is a trademark of Chicago Board Options Exchange, Incorporated
("CBOE") and Standard
& Poor’s has granted a license to NSE, with permission from CBOE, to use such
mark in the name of the India VIX and for purposes relating to the India VIX.