Calculation and mechanics
CBOE calculates the VVIX with a method similar to the VIX. It uses the prices of a range of VIX puts and calls and converts them to a constant horizon of 30 days. Technically the VVIX refers to the expected volatility of the 30-day forward price of the VIX and is quoted as an annualised percentage.
The VVIX does not have to move in step with the VIX. It can rise, for example, while the VIX itself barely changes, when the implied volatility of VIX options increases. A high VVIX therefore mainly means that the option market prices in larger swings in future VIX values.
Distinction
The VIX measures the expected volatility of the S&P 500, the VVIX the expected volatility of future VIX values. The SKEW Index instead measures the skewness of the distribution derived from SPX options and thus a different dimension of the option market.
Sources
Related terms
- VIX (CBOE Volatility Index)
- SKEW Index (CBOE SKEW, tail risk index)
- Implied Volatility (IV)
- VIX3M and VIX/VIX3M Ratio (CBOE 3-Month Volatility Index, formerly VXV)
All market and analytical information is provided for educational and analytical purposes only and does not constitute investment advice or a trading recommendation.