Capital Markets: Challenges and Developments

India VIX Index


From UPSC perspective, the following things are important :

Prelims level: India VIX Index

Mains level: Impact of coronovirus outbreak on Economy

The  India VIX Index, an indicator of the volatility of the stock market has been plunging after the outbreak of novel coronavirus.

What is Volatility Index?

  • Volatility Index is a measure of the 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.
  • It is a measure, of the amount by which an underlying Index is expected to fluctuate, in the near term, (calculated as annualized volatility, denoted in percentage e.g. 20%) based on the order book of the underlying index options.

India VIX Index

  • 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 (%) are calculated which indicates the expected market volatility over the next 30 calendar days.
  • “VIX” is a trademark of Chicago Board Options Exchange, Incorporated (“CBOE”) and Standard & Poor’s.
  • The firm has granted a license to NSE to use such mark in the name of the India VIX and for purposes relating to the India VIX.

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