SENSEX Realized Volatility Index Available on the India Premium Database

CEIC India Data Talk: The SENSEX Realized Volatility (REALVOL) index, provided by the Bombay Stock Exchange Limited (BSE), is now available on the India Premium Database for realised volatility over a time horizon of one, two, and three months. The index is based on the returns of the SENSEX (calculated as the daily closing value of the BSE SENSEX – SENSEX is one of the main indexes on the BSE) and is synchronised with its associated futures and options expiration cycle before being reset at the expiry of the cycle; the REALVOL index is essentially a standard deviation on daily log returns of the SENSEX, assuming a 252-day business year. Effective February 2012, the option generally expires on the last Thursday of the month it is due. Given similar expiry dates during certain option expiry cycles, the REALVOL of different time horizons may coincide. For example, the REALVOL last coincided for all three time horizons during February 2013 at a volatility value of 11.41 for all three time horizons (previously it was in July 2012). The SENSEX REALVOL index will help inform participants about historic volatility of the underlying BSE SENSEX index over different time horizons, hence serving as a risk management tool of sorts. This will be especially beneficial in derivatives trading, especially with option pricings and as a key input in econometric models and other volatility-dependent statistical models, allowing users to manage “gamma exposures” by tracking sudden price movements in the index. The launch of the REALVOL came about as the Stock and Exchange Board of India (SEBI) issued a circular during April 2010 permitting the introduction of derivatives contracts on volatility indices subject to the existence of a one year track record and the presence of the appropriate risk management framework. Activity in BSE’s derivatives market is modest with an open interest of 90,075 derivatives contracts as of February 2013 corresponding to a turnover of INR 22.99 billion. However, BSE’s derivatives market pales in comparison to the rival National Stock Exchange Limited which boasts an open interest of 3.04 million derivatives contracts during March 2012, corresponding to an open interest of 297,198 contracts during the same period. Discuss this post and many other topics in our LinkedIn Group (you must be a LinkedIn member to participate). Request a Free Trial Subscription. By Chan Yee Lui - CEIC Analyst Back to Blog
21st May 2013 SENSEX Realized Volatility Index Available on the India Premium Database