Standard & Poor's (S&P) and the Australian Securities Exchange (ASX) will launch an Australian equity volatility index, named the S&P/ASX 200 VIX.
The new index measures investor sentiment about the expected volatility in the Australian benchmark, the S&P/ASX 200.
A rise in the index implies a market expectation of large changes in the S&P/ASX 200 over the next 30 days.
"The new volatility index will provide investors, financial media, researchers and economists with a means to gauge the level of volatility anticipated in the Australian equity market over the near term," ASX equity markets general manager Richard Murphy said.
"Because the S&P/ASX 200 VIX is a forward-looking volatility measure, observers of the index will have insight into the degree of uncertainty among investors and their expectations regarding the magnitude of future movements in the local equity market," he said.
The S&P/ASX 200 VIX will measure expected volatility by analysing the daily settlement prices for put and call options, a methodology developed by the Chicago Board Options Exchange.
The index will initially be available as an end-of-day index from the ASX, with back data published on the ASX website.
ASX will consider making the index available in real time and launching derivative products over the volatility index at a later date.
The new index will be available from Thursday 23 September and has been given the ticker XVI.
