India" s Volatility Index
The movement in the value of a security is known as volatility. Securities that have a higher price fluctuation are said to have higher volatility as compared to securities that have a lower fluctuation in price. Volatility can be used as a measure of risk by the means of observing how much a shares price moves up and down.
In other words, if the change in price of a security is higher, it is said to be more volatile as opposed to a security whose price change is lower. By observing the security for the past 30 days and calculating the standard deviation of the change in price of a security in percentages, volatility can be obtained.
Volatility Index (VIX)
The VIX is a tool used to measure the movement in the price of a share. The Volatility Index has certain technical and informal names such as the VIX and the 'fear index'. It is called the fear index as a market with a high reading on the VIX has more fluctuations and is thus feared by investors.
The VIX can also be used to foresee financial disasters. In one instance in the United States, in August of 2008 the VIX touched 38, the highest point in its history but then two months later, the volatility index touched an astounding 89.53, sprouting worry of the beginning of financial recession.
The National Stock Exchange of India launched its own Volatility Index created on the Nifty 50 option. It is used to foresee movement in share prices of the Nifty index for the next month. "The India VIX is a simple but useful tool in determining the overall volatility of the market. The index captures the implied volatility embedded in option prices. Not only is the volatility index used as an indicator of implied volatility of the market, various tradable products, such as futures and options contracts are available on the volatility index internationally," said the NSE website.
The highest point the NSE VIX touched was 85 in April 2008 and the lowest ever was 16.7 in March this year. 2010 faced the lowest ever recording on the Nifty VIX which was a good sign for investors where the market would be less volatile and prices would fluctuate less.
Volatility Index clubbed with stock picks available on the internet can help investors reduce losses, making investing in the market more profitable.
In other words, if the change in price of a security is higher, it is said to be more volatile as opposed to a security whose price change is lower. By observing the security for the past 30 days and calculating the standard deviation of the change in price of a security in percentages, volatility can be obtained.
Volatility Index (VIX)
The VIX is a tool used to measure the movement in the price of a share. The Volatility Index has certain technical and informal names such as the VIX and the 'fear index'. It is called the fear index as a market with a high reading on the VIX has more fluctuations and is thus feared by investors.
The VIX can also be used to foresee financial disasters. In one instance in the United States, in August of 2008 the VIX touched 38, the highest point in its history but then two months later, the volatility index touched an astounding 89.53, sprouting worry of the beginning of financial recession.
The National Stock Exchange of India launched its own Volatility Index created on the Nifty 50 option. It is used to foresee movement in share prices of the Nifty index for the next month. "The India VIX is a simple but useful tool in determining the overall volatility of the market. The index captures the implied volatility embedded in option prices. Not only is the volatility index used as an indicator of implied volatility of the market, various tradable products, such as futures and options contracts are available on the volatility index internationally," said the NSE website.
The highest point the NSE VIX touched was 85 in April 2008 and the lowest ever was 16.7 in March this year. 2010 faced the lowest ever recording on the Nifty VIX which was a good sign for investors where the market would be less volatile and prices would fluctuate less.
Volatility Index clubbed with stock picks available on the internet can help investors reduce losses, making investing in the market more profitable.
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