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Market rout: NSE VIX signals heightened volatility, rises 64.36%

BT Online Bureau     August 24, 2015

The India NSE VIX on Monday rose 64.36 per cent, marking its biggest single-day jump in the recent past.  

The index which signals market expectations of near-term volatility rose to a intra-day high of 30.65 level but closed at 28.13, up 11 points from 17.11 points at the beginning of the trade.

India VIX is a volatility index based on the index option prices of NSE's benchmark index NIFTY. India VIX uses the computation methodology of Chicago Board Options Exchange (CBOE), with suitable amendments to adapt to the NIFTY options order book. India VIX is computed using the best bid and ask quotes of the out-of-the-money near and mid-month NIFTY option contracts, which are traded on the F&O segment of NSE. There are several factors which are used to calculate the index.

Its US counterpart, the CBOE VIX index also known as the 'fear index', was trading 30.54 per cent higher on Monday during market hours. The index rose 46.5% on Friday when US markets recorded their steepest one-day drop since 2011. The Dow Jones industrial average closed down 530.94 points, or 3.12 per cent, to 16,459.75, the S&P 500 lost 64.84 points, or 3.19 per cent, to 1,970.89 and the Nasdaq Composite dropped 171.45 points, or 3.52 per cent, to 4,706.04.

The index signals market's expectation of 30-day volatility. The index is constructed using the implied volatilities of a wide range of S&P 500 index options. The index estimates expected volatility by averaging the weighted prices of SPX puts and calls over a wide range of strike prices.

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