S&P 500 Dynamic VIX Futures Index Methodology

Transcription

1 S&P 500 Dynamic VIX Fuures Index Mehodology April 2014 S&P Dow Jones Indices: Index Mehodology

2 Table of Conens Inroducion 2 Highlighs 2 Family 2 Index Consrucion 3 Consiuens 3 Allocaions 3 Excess Reurn (ER) Calculaions 4 Toal Reurn (TR) Calculaions 5 Base Dae 6 Index Governance 7 Index Commiee 7 Index Policy 8 Announcemens 8 Holiday Schedule 8 Index Disseminaion 9 Tickers 9 S&P Dow Jones Indices Conac Informaion 10 Index Managemen 10 Produc Managemen 10 Media Relaions 10 Clien Services 10 Disclaimer 11 S&P Dow Jones Indices: S&P 500 Dynamic VIX Fuures Index Mehodology 1

3 Inroducion The S&P 500 Dynamic VIX Fuures Index series dynamically allocaes beween he shor-erm and mid-erm VIX fuures indices excess reurn o provide cos efficien exposure o forward implied volailiy. I uses The S&P 500 VIX Shor-Term Fuures Index Excess Reurn The S&P 500 VIX Mid-Term Fuures Index Excess Reurn Highlighs Implied equiy volailiy has hisorically had a srongly negaive correlaion o equiy marke reurns and is considered a useful ool o hedge agains he poenial downside of he broad equiy marke. The S&P 500 VIX Fuures Indices model he oucome of holding long posiions in VIX fuures conracs ha mainain consan mauriy. Exchange raded producs based on hese indices provide convenien access o implied volailiy. For more informaion on he S&P 500 VIX Fuures Indices, please refer o S&P 500 VIX Fuures Index mehodology documen. The S&P 500 Dynamic VIX Fuures Index moniors he seepness of he implied volailiy curve o provide informaion abou fuure expecaions of marke volailiy and he expeced roll cos of VIX fuures invesmens. The S&P 500 Dynamic VIX Fuures Index dynamically allocaes beween posiions across he VIX fuures curve aiming o lower he holding cos of invesmens linked o forward implied volailiy. The allocaions are evaluaed daily, hough changes in allocaion may occur less frequenly. Family The S&P 500 Dynamic VIX Fuures Index series belongs o he family of S&P 500 volailiy linked indices which includes, among ohers, VIX 1 (Chicago Board Opions Exchange Volailiy Index), he S&P 500 Volailiy Arbirage Index and he S&P 500 VIX Fuures Index Series. 1 VIX is a regisered rademark of Chicago Board Opions Exchange, Incorporaed. The VIX mehodology is he propery of he Chicago Board Opions Exchange ("CBOE"). S&P Dow Jones Indices: S&P 500 Dynamic VIX Fuures Index Mehodology 2

4 Index Consrucion Consiuens The S&P 500 Dynamic VIX Fuures Index is comprised of wo componens: Allocaions 1. Shor-erm volailiy, represened by he S&P 500 VIX Shor-Term Fuures Index Excess Reurn 2. Mid-erm volailiy, represened by he S&P 500 VIX Mid-Term Fuures Index Excess Reurn On any business day,, he S&P 500 Dynamic VIX Fuures Index allocaes beween he shor-erm and mid-erm volailiy based on of he implied volailiy erm srucure variable (IVTS). While he allocaions are reviewed daily, hey may change on a less frequen basis. The arge allocaions o he shor-erm volailiy (TS) and he mid-erm volailiy (TM) are deermined by he implied volailiy erm srucure (IVTS) and implied volailiy rend (IVT) as follows: Implied Volailiy Term Srucure IVTS ) ( 1 Targe Shor-Term Volailiy Allocaion TS ) ( Targe Mid-Term Volailiy Allocaion TM ) ( Less han 90% % IVTS -1 < 100% % IVTS -1 < 105% % IVTS % More han 115% S&P Dow Jones Indices: S&P 500 Dynamic VIX Fuures Index Mehodology 3

5 The S&P 500 Dynamic VIX Fuures Index limis he size of changes o is daily allocaion rebalancing. The Shor-Term and Mid-Term Volailiy Allocaions (S and M, respecively) are deermined as follows: S M S 1 if S 1 = TS = min( S , TS ) if S max( S , TS ) if S 1 1 M 1 if M 1 = TM = min( M , TM ) if M max( M , TM ) if M < TS > TS 1 1 < TM > TM (1) Evaluaing implied volailiy erm srucure The implied volailiy erm srucure measures he slope of he VIX fuures curve. Le IVTS denoe he implied volailiy erm srucure, where: IVTS 1 = VIX VXV 1 1 (2) where: VIX -1 and VXV -1 refer o he CBOE Volailiy Index (VIX) and he CBOE S&P Monh Volailiy Index (VXV), respecively. Excess Reurn (ER) Calculaions On any business day,, he excess reurn index levels are calculaed. The excess reurn indices assume no accruals from cash. The S&P 500 Dynamic VIX Fuures Index excess reurn is calculaed as follows: where: ( + S * SEDR M MEDR ) IndexER = IndexER * (3) r + 1 IndexER -1 = The S&P 500 Dynamic VIX Fuures Index Excess Reurn on he preceding business day, -1 S 1 = Allocaion o he S&P 500 VIX Shor-Term Fuures Index on he prior business day, -1 SEDR = Shor-Term Volailiy Daily Excess Reurn, as deermined by he following formula: S&P Dow Jones Indices: S&P 500 Dynamic VIX Fuures Index Mehodology 4

6 SPVXSP SEDR = 1 (4) SPVXSP where: 1 SPVXSP = The S&P 500 VIX Shor-Term Fuures Excess Reurn Index closing level on he curren business day,. M 1 = Allocaion o he S&P 500 VIX Mid-Term Fuures Index on he prior business day, -1 MEDR = Mid-Term Volailiy Daily Excess Reurn, as deermined by he following formula: SPVXMP MEDR = 1 (5) SPVXMP where: 1 SPVXMP = The S&P 500 VIX Mid-Term Fuures Excess Reurn Index closing level on he curren business day,. Toal Reurn (TR) Calculaions A oal reurn index is calculaed for he S&P 500 Dynamic VIX Fuures Index, which includes ineres based on he hree-monh U.S. Treasury rae. ( + S * SEDR + M MEDR TBR ) = IndexTR 1 1 r 1 * IndexTR 1 + (6) where: IndexTR -1 = The S&P 500 Dynamic VIX Fuures Index Toal Reurn on he preceding business day, -1 S 1 = Allocaion o he S&P 500 VIX Shor-Term Fuures Index on he prior business day, -1 SEDR = Shor-Term Volailiy Daily Excess Reurn, as deermined by formula (4) M 1 = Allocaion o he S&P 500 VIX Mid-Term Fuures Index on he prior business day, -1 MEDR = Mid-Term Volailiy Daily Excess Reurn, as deermined by formula (5) S&P Dow Jones Indices: S&P 500 Dynamic VIX Fuures Index Mehodology 5

7 Base Dae TBR = Treasury Bill Reurn, as deermined by he following formula: Dela 91 1 TBR = 1 (7) 91 1 * TBAR Dela = he number of calendar days beween he curren and previous business days. TBAR -1 = he mos recen weekly high discoun rae for 91-day US Treasury bills effecive on he preceding business day. Generally he raes are announced by he US Treasury on each Monday. On Mondays ha are bank holidays, Friday s raes will apply. The base dae for he indices is December 20, 2005 and he base value is 1,000 for boh he excess and oal reurn indices. S&P Dow Jones Indices: S&P 500 Dynamic VIX Fuures Index Mehodology 6

8 Index Governance Index Commiee The Commodiies Index Commiee mainains he S&P 500 Dynamic VIX Fuures Indices. The commiee mees regularly. A each meeing, he Index Commiee reviews any significan marke evens. In addiion, he Index Commiee may revise index policy for iming of rebalancings or oher maers. S&P Dow Jones Indices considers informaion abou changes o is indices and relaed maers o be poenially marke moving and maerial. Therefore, all Index Commiee discussions are confidenial. S&P Dow Jones Indices: S&P 500 Dynamic VIX Fuures Index Mehodology 7

9 Index Policy Announcemens Announcemens of he daily index values are made afer he close of he CBOE Fuures Exchange each day. Holiday Schedule The index is calculaed daily when he S&P 500 VIX Fuures Index Series are calculaed. S&P Dow Jones Indices: S&P 500 Dynamic VIX Fuures Index Mehodology 8

10 Index Disseminaion Hisorical index reurns are available hrough S&P Dow Jones Indices daa group for subscripion via FTP. Tickers Index S&P 500 Dynamic VIX Fuures Index ER S&P 500 Dynamic VIX Fuures Index TR S&P 500 Dynamic VIX Fuures Index ER (Official Close) S&P 500 Dynamic VIX Fuures Index TR (Official Close) Bloomberg SPDVIXE SPDVIXT SPDVIXP SPDVIXTR S&P Dow Jones Indices: S&P 500 Dynamic VIX Fuures Index Mehodology 9

11 S&P Dow Jones Indices Conac Informaion Index Managemen David M. Blizer, Ph.D. Managing Direcor & Chairman of he Index Commiee Mark Berkenkopf Team Leader, Commodiy Produc Managemen Reid Seadman Managing Direcor Media Relaions David Guarino Communicaions Clien Services Beijing Dubai Hong Kong London New York or Sydney Tokyo S&P Dow Jones Indices: S&P 500 Dynamic VIX Fuures Index Mehodology 10

12 Disclaimer S&P Dow Jones Indices LLC, a par of McGraw Hill Financial All righs reserved. Sandard & Poor s and S&P are regisered rademarks of Sandard & Poor s Financial Services LLC ( S&P ), a par of McGraw Hill Financial. Dow Jones is a regisered rademark of Dow Jones Trademark Holdings LLC ( Dow Jones ). Trademarks have been licensed o S&P Dow Jones Indices LLC. Redisribuion, reproducion and/or phoocopying in whole or in par are prohibied wihou wrien permission. This documen does no consiue an offer of services in jurisdicions where S&P Dow Jones Indices LLC, Dow Jones, S&P or heir respecive affiliaes (collecively S&P Dow Jones Indices ) do no have he necessary licenses. All informaion provided by S&P Dow Jones Indices is impersonal and no ailored o he needs of any person, eniy or group of persons. S&P Dow Jones Indices receives compensaion in connecion wih licensing is indices o hird paries. Pas performance of an index is no a guaranee of fuure resuls. I is no possible o inves direcly in an index. Exposure o an asse class represened by an index is available hrough invesable insrumens based on ha index. S&P Dow Jones Indices does no sponsor, endorse, sell, promoe or manage any invesmen fund or oher invesmen vehicle ha is offered by hird paries and ha seeks o provide an invesmen reurn based on he performance of any index. S&P Dow Jones Indices makes no assurance ha invesmen producs based on he index will accuraely rack index performance or provide posiive invesmen reurns. S&P Dow Jones Indices LLC is no an invesmen advisor, and S&P Dow Jones Indices makes no represenaion regarding he advisabiliy of invesing in any such invesmen fund or oher invesmen vehicle. A decision o inves in any such invesmen fund or oher invesmen vehicle should no be made in reliance on any of he saemens se forh in his documen. Prospecive invesors are advised o make an invesmen in any such fund or oher vehicle only afer carefully considering he risks associaed wih invesing in such funds, as deailed in an offering memorandum or similar documen ha is prepared by or on behalf of he issuer of he invesmen fund or oher vehicle. Inclusion of a securiy wihin an index is no a recommendaion by S&P Dow Jones Indices o buy, sell, or hold such securiy, nor is i considered o be invesmen advice. These maerials have been prepared solely for informaional purposes based upon informaion generally available o he public and from sources believed o be reliable. No conen conained in hese maerials (including index daa, raings, credi-relaed analyses and daa, research, valuaions, model, sofware or oher applicaion or oupu herefrom) or any par hereof (Conen) may be modified, reverse-engineered, reproduced or disribued in any form or by any means, or sored in a daabase or rerieval sysem, wihou he prior wrien permission of S&P Dow Jones Indices. The Conen shall no be used for any unlawful or unauhorized purposes. S&P Dow Jones Indices and is hird- S&P Dow Jones Indices: S&P 500 Dynamic VIX Fuures Index Mehodology 11

13 pary daa providers and licensors (collecively S&P Dow Jones Indices Paries ) do no guaranee he accuracy, compleeness, imeliness or availabiliy of he Conen. S&P Dow Jones Indices Paries are no responsible for any errors or omissions, regardless of he cause, for he resuls obained from he use of he Conen. THE CONTENT IS PROVIDED ON AN AS IS BASIS. S&P DOW JONES INDICES PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no even shall S&P Dow Jones Indices Paries be liable o any pary for any direc, indirec, incidenal, exemplary, compensaory, puniive, special or consequenial damages, coss, expenses, legal fees, or losses (including, wihou limiaion, los income or los profis and opporuniy coss) in connecion wih any use of he Conen even if advised of he possibiliy of such damages. S&P Dow Jones Indices keeps cerain aciviies of is business unis separae from each oher in order o preserve he independence and objeciviy of heir respecive aciviies. As a resul, cerain business unis of S&P Dow Jones Indices may have informaion ha is no available o oher business unis. S&P Dow Jones Indices has esablished policies and procedures o mainain he confidenialiy of cerain non-public informaion received in connecion wih each analyical process. In addiion, S&P Dow Jones Indices provides a wide range of services o, or relaing o, many organizaions, including issuers of securiies, invesmen advisers, broker-dealers, invesmen banks, oher financial insiuions and financial inermediaries, and accordingly may receive fees or oher economic benefis from hose organizaions, including organizaions whose securiies or services hey may recommend, rae, include in model porfolios, evaluae or oherwise address. VIX is a regisered rademark of Chicago Board Opions Exchange, Incorporaed. The VIX mehodology is he propery of he Chicago Board Opions Exchange ("CBOE"). S&P Dow Jones Indices: S&P 500 Dynamic VIX Fuures Index Mehodology 12