Stoxx has launched the Euro Stoxx 50 Volatility Short-Term Futures Index, which measures the performance of a hypothetical, rolling portfolio invested into constant maturity implied volatilities on the underlying Euro Stoxx 50 Index.
The index has been licensed to Barclays Capital to underlie an exchange-traded note.
“As the importance of volatility as an asset class of its own grows steadily, Stoxx adds the newest index to its strategy index family, thereby reinforcing its commitment to develop innovative and complex index concepts,” says Hartmut Graf (pictured), chief executive officer, Stoxx. “The V Stoxx Short-Term Futures Index is a superior tool to measure the return from a rolling long position in the first and second month Eurex V Stoxx futures contracts.”
Dixit Joshi, managing director, head of equities EMEA, Barclays Capital, adds: “We are delighted to have worked jointly with Stoxx towards the launch of this new benchmark index. Volatility has become an essential tool used by many of our clients both for diversifying traditional equity portfolios and for taking outright views on its direction. The V Stoxx Short-Term Futures Index will provide our clients with transparent and liquid access to implied volatility.”
The index replicates a hypothetical portfolio which measures the returns from a rolling investment made into two V Stoxx futures contracts traded on Eurex with a remaining maturity of one and two months.
The index rolls from the front month futures contract into the second month futures contract on a daily basis. On the business day preceding the Eurex V Stoxx futures settlement date, all of the weight is allocated to the front month futures contract.
From the next day on, on a daily basis, a fraction of the front month contract is sold and an equal notional amount of the second month contract is bought until the next settlement date, at which the index roll is complete and the front month Eurex V Stoxx futures contract is settled. At this point, the remaining maturity of the second month contract is one month. Therefore it becomes the front month contract, and the index is gradually rolled into a new futures contract with a two month maturity.
The index is available in excess and total return versions.