VDAX®-NEW - Homepage of Stephan Kruegel

Transcrição

®
VDAX -NEW
Deutsche Börse AG
Frankfurt am Main, April 2005
With VDAX®-NEW, Deutsche Börse quantifies future
market expectations of the German stock market
Overview
1 a)
Index is strongly rule-based, transparent
and easy to replicate
2 b)
Volatility is strongly un-correlated to
equities and therefore offers perfect
diversification for portfolios
3 a)
VDAX®-NEW represents a separate asset
class and is a perfect underlying for
structured products
VDAX®-NEW
Quantifies the expected
risk in the German
stock market
Launch: 20 April 05
VDAX®, VDAX®-NEW, DAX® , DivDAX® TecDAX®, MDAX®, SDAX®, CDAX® und CEF® are registered trademarks of Deutschen Börse AG
1
1
VDAX®-NEW as a tradable volatility instrument
How about volatility?
Volatility tends to grow during times
of uncertainty (fear gauge)
Volatility tends to revert to its
historical mean
Volatility is un-correlated with its
underlying
Implied volatility tends to be larger
than realized/historical volatility
Volatility can be traded as implied,
local and realized volatility
VDAX®-NEW is the market
barometer of the DAX® 30
companies
The index expresses the market
expectation of the amplitude of
fluctuation in the DAX®
VDAX®-NEW as a transparent,
liquid and tradable volatility
instrument
2
1
The index specification of VDAX®-NEW is simple,
transparent and based on high liquidity
Index Features
VDAX®-NEW
Approach
Underlying options
Calculation
Implied variances of all relevant options per duration
performes analogue to implied volatility
Implied variances are easier to hegde than implied
volatility
Relevant option subset is based on 8 option series
with max. expiration of 2 years
Rolling index has a fixed expiration of 30 days with
linear interpolation
Derived directly from option prices
3
1
The index design is rule-based, transparent and
simple to rebuild
Index Methodology
Evaluation of Sub-index per option expiry based on the square-root of implied variance
100 times the square root of σVar2
The first 8 expirations are covered by sub-indices
Stable and nice formula for evaluation using options prices directly not implied
volatilities: summation of OTM prices
More representative (strip of options)
Index is closely related to implied ATM volatility
Information on full skew is contained in strip of options
All sub-indices are calculated real time
Update frequency of 1 minute
Construction of rolling index at 30 days to expiration through linear interpolation of the
two nearest sub-indices
4
1
There are important differences in the methodology
of VDAX® and VDAX®-NEW
Differences between VDAX®-NEW and VDAX®
VDAX®
VDAX®-NEW
Measures implied volatility using the ATM
DAX® options
Utilizes implied volatility derived from ATM and
OTM-options per maturiry series
Calculation needs the Black-Scholes
Option Pricing Model and is
computationally intensive
Mathematical basis is not volatility but rather
variance or volatility squared
Main index has a rolling fixed maturity of
45 days
Calculation does not need option pricing model
but only involves summations over option
prices and is computationally less intensive
Index measures the square root of the implied
variance
Main index has a rolling fixed maturity of 30
days
5
1
Relevant improvements of VDAX®-NEW
Relevant improvements in the methodology of VDAX®-NEW
Observed ATM and OTM-options covers and captures more of the volatility skew than
the old methodology. Index is therefore less sensitive to individual options.
Avoidance of an option pricing model makes the new index computationally less
intensive
VDAX®-NEW is easier to hedge – the coverage of a broader volatility skew makes it
easier and cheaper to fine tune and dynamically hedge your option portfolio
Whereas VDAX® contains information about ATM option prices, the square root of
implied variance contains information about the entire volatility surface.
The methodology of VDAX®-NEW measures expected volatility as financial theorists,
risk managers and volatility traders – so it is in dependence on financial and risk
industry practices.
6
2
VDAX®-NEW is highly correlated to VDAX® and an
ideal successor index
Performance VDAX®-NEW vs. VDAX®
1)
250
Price
200
150
Correlation coefficient
between VDAX®-NEW
AND VDAX® is 0,9920
VDAX®-NEW is the
perfect successor-index
for VDAX®
100
50
Sep-04
May-04
Jan-04
Sep-03
May-03
Jan-03
Sep-02
May-02
Jan-02
Sep-01
May-01
Jan-01
Sep-00
May-00
Jan-00
Sep-99
May-99
Jan-99
0
Date
VDAX®
-NEW
VDAX®
1) Indexed at 100 points on 4 January 1999
7
2
VDAX®-NEW is highly uncorrelated to DAX® and
MDAX® and therefore interesting for diversification
Performance VDAX®-NEW vs. DAX® and MDAX®
1)
300
250
VDAX®-NEW is highly
uncorrelated to DAX® and MDAX®
VDAX®-NEW set-up volatility as a
new asset class
Establish risk-insurance product
for DAX® and MDAX® related
portfolios
Price
200
150
VDAX®-NEW
100
MDAX®
Jul-04
Apr-04
Jan-04
Oct-03
Jul-03
Apr-03
Jan-03
Oct-02
Jul-02
Apr-02
Jan-02
Oct-01
Jul-01
Apr-01
Jan-01
50
Date
300
250
Price
200
VDAX®-NEW
150
VDAX® -NEW
100
DAX®
50
VDAX®-NEW
DAX®
MDAX®
1
DAX®
- 0,5361
1
MDAX®
- 0,8896
0,6259
Jul-04
Apr-04
Jan-04
Oct-03
Jul-03
Apr-03
Jan-03
Oct-02
Jul-02
Apr-02
Jan-02
Oct-01
Jul-01
Apr-01
Jan-01
0
1
Date
8
2
A portfolio diversification with VDAX®-NEW generates
better performance with lower risk exposure
Performance DAX/VDAX®-NEW Portfolio vs. DAX®
1)
600
500
Price
400
DAX® (80%) and VDAX®NEW (20%) portfolio
generates on average
nearly 3 percentage points
better performance
Diversification with
VDAX®-NEW generates
additional performance
with lower risk exposure
300
200
100
Date
DAX® TR
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
Jan-99
Jan-98
Jan-97
Jan-96
Jan-95
Jan-94
Jan-93
Jan-92
0
Portfolio:
80% DAX®
20 % VDAX®-NEW
9
3
VDAX®-NEW as information tool and underlying for
trading strategies
Application of VDAX®-NEW
I.
VDAX®-NEW as Information
tool
II.
VDAX®-NEW as underlying for
trading strategies
For buy side, research and issuers of
structured products
Directional Trading:
Betting on future levels of volatility/risk
Spread Trading:
Trade the spread between realized and
implied volatilities
Hedging:
Cover short volatility positions
10
3
VDAX®-NEW as a perfect underlying for structured
products with a tactic investment perspective
Possible use cases
Investment function
For heavy trader who want to speculate on
pure volatility
Diversification instrument
For investors who want to diversify German
equity portfolios
Information and benchmarking
Benchmark for German equity volatility
VDAX®-NEW allows the development of complex structured
products looking for an exposure to volatility!
11
Fast Facts VDAX®-NEW Index
Performance1) compared to DAX®
VDAX®-NEW: start as of 20 April 2005
Expresses market expectation of the
amplitude of fluctuation in DAX®
1 rolling main index and 8 sub-indices
Index is able to react only to changes in
volatility
300
250
200
Price
Index Features
150
100
50
Date
VDAX®-NEW
DAX®
Index
VDAX®-NEW
ISIN
DE000A0DMX99
REUTERS
.V1Xi
V1X
Bloomberg
Jul-04
Apr-04
Jan-04
Oct-03
Jul-03
Apr-03
Jan-03
Oct-02
Jul-02
Apr-02
Jan-02
Oct-01
Jul-01
Apr-01
Jan-01
0
Index Methodology
Calculation of implied variances of relevant
DAX® options
Index is based on 8 sub-indices which include
DAX® options from 2-24 months expiration
Rolling index is calculated on linear
interpolation of two sub-indices with residual
term of 30 days
12
Contact
Heiko Geiger
(Marketing & Sales)
Issuer Data & Analytics
+49 69 211 12866
[email protected]
Konrad Sippel
(Index Development)
Issuer Data & Analytics
+49 69 211 17369
[email protected]
13

VDAX®-NEW - Homepage of Stephan Kruegel

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