CBOE Interest Rate Swap Volatility Index (SRVX) Discussed at RMC Europe

Here are the main topics that were covered by a session on Friday, September 7th at CBOE’s RMC Europe conference –


Analyzing and Forecasting Volatility

– Fixed and dynamic benchmarks for expected returns and expected variances

– What role should subjective analysis play in determining volatility regimes? – Equity volatility vs interest rate swap volatility; empirical behavior of volatility surfaces

– Investment implications for different portfolios

Moderator: Chris Limbach, Advisor to the CEO, PGGM Investments


Andrew Harmstone, Portfolio Manager, Morgan Stanley Investment Management

Yoshiki Obayashi , Founder, Applied Academics, LLC

A new index to be covered at session is the CBOE Interest Rate Swap Volatility Index ("CBOE SRVXSM Index") www.cboe.com/SRVX the first standardized volatility measure in the interest rate swap market, or indeed in the fixed-income market.

SRVX is designed to standardize and simplify trading in the interest rate swap market, much as the CBOE Volatility Index® (VIX®) does in the equity market. The interest rate swap market is the largest over-the-counter derivatives market, with notional amounts in the trillions.

Swaption expirations and swap tenors range from one month to thirty years and are denominated in multiple currencies. The CBOE SRVX Index is based on 1-year swaptions on 10 year U.S. Dollar interest rate swaps, a benchmark for the USD interest rate swap market. The full ticker symbol of the index is SRVXed, where e stands for a one year expiration and d for a ten year tenor.

Following the dominant swaption market convention, the CBOE SRVX Index measures the "basis point" volatility of the forward swap rate, i.e. the volatility of changes in the forward swap rate (as opposed to percentage changes in the rate, as done for VIX). Similar to the CBOE VIX Index, the index is calculated from a strip of at-and out-of-the-money option prices but with a different weighting scheme.


Volatility indexes www.cboe.com/volatility

Papers on Income Enhancement and Tail Risk Management www.cboe.com/benchmarks

CBOE Risk Management Conference in Ireland – Sept. 5 – 7 2012 www.cboermc.com/Europe