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VSTOXX Indices
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A two-step process leads to the determination of the level of a VSTOXX index:
In the first step, EURO STOXX 50 options traded on Eurex are grouped by maturity. For each of the first eight standard maturities available, a portfolio is constructed that determines the implied volatility of the EURO STOXX 50 for that maturity: this will be referred to as a VSTOXX sub-index of a certain tenor.
In the second step, a target tenor for volatility is identified: for instance, a constant 30-day volatility. To achieve this constant time to maturity, the average of two sub-indices is calculated. The two elected sub-indices will have the closest (variable) time to maturity to the targeted, fixed term and be weighted in such a way that the resulting combined time to maturity matches the targeted one. The resulting average is called a VSTOXX main index and represents the implied volatility of EURO STOXX 50 over the targeted term.
Although the main index VSTOXX 30 days is the most popular one – and is usually referred to as the VSTOXX – eleven other main indices are calculated, covering fixed maturities up to 360 days in increments of 30 days.
For more on the VSTOXX methodology, please click here
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