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Volatility Index

VIX is a trademarked ticker symbol for the Chicago Board Options Exchange Market Volatility Index, a popular measure of the implied volatility of S&P 500 index options. Often referred to as the fear index or the fear gauge, it represents one measure of the market's expectation of stock market volatility over the next 30 day period.

The idea of a volatility index, and financial instruments based on such an index, was first developed and described by Prof. Menachem Brenner and Prof. Dan Galai in 1986, and first published in "New Financial Instruments for Hedging Changes in Volatility," appearing in the July/August 1989 issue of Financial Analysts Journal. ^[1] In a subsequent paper, Professors Brenner and Galai proposed a formula to compute the volatility index.^[2]

In 1992, the CBOE commenced a feasibility study for the computation and listing of an index security. In 1993, the CBOE then introduced a volatility index under the trademark "VIX", based on a formula suggested by Prof. Robert Whaley in The Journal of Derivatives, Fall 1993.

The VIX is quoted in percentage points and translates, roughly, to the expected movement in the S&P 500 index over the upcoming 30-day period, which is then annualized. "VIX" is a registered trademark of the CBOE.^[

^{http://en.wikipedia.org/wiki/VIX}

^{or http://www.investopedia.com/terms/v/vix.asp}