Market Volatility

Fixed income markets amount to one of the largest segments of the whole capital market universe. The VIX index maintained by Chicago Board Options Exchange (Cboe) is a measure of expected volatility in the US equity market. Since the early 2010s, Antonio’s startup, QUASaR (Quantitative Strategies and Research) has teamed up with Cboe and Applied Academics for the purpose of creating a suite of indices of expected volatility in various segments of the fixed income markets. In 2012, Cboe launched the SRVIX Index of Interest Rate Swap Volatility and, in 2013, Cboe launched the TYVIX Index (volatility of US Public Debt). In 2015, S&P Dow Jones Indices and Cboe launched the JGB-VIX Index (volatility of Japanese Public Debt). In 2014, CBOE Future Exchange launched futures contracts referenced to TYVIX, the first exchange-traded contracts based on these new standardized fixed income volatility gauges.

Please visit the following websites for market data and other institutional features

 

Below are links to research into fixed income market volatility that I’ve conducted during the 2010s:

Book and survey

  • BOOK: The Price of Fixed Income Market Volatility (with Yoshiki Obayashi) Springer: Springer Series in Finance, New York (2015), 250 pages

Unifies work on security design and related issues arising while pricing and indexing fixed income volatility

 

Download Preface Springer.com Amazon.com Google Books

 

Download corrections

 

  • “Interest Rate Derivatives and Volatility” (with Yoshiki Obayashi) Handbook of Fixed-Income Securities: Handbook Series in Financial Engineering and Econometrics. John Wiley & Sons (Editor Pietro Veronesi) Chapter 20, 767-838 (2016).

Surveys interest rate derivatives and their use to hedge against fixed income volatility

 

Download Article Wiley.com Amazon.com

Articles and notes

  • “Credit Volatility Indexes” (with Yoshiki Obayashi) (October 2020)

Details for implementing credit spread variance pricing methodologies based on credit default swap options (with both vanilla and exotic payoffs)

 

Swiss Finance Institute Research Paper Series No. 20-88Download

This paper supersedes our SFI Research Paper No. 13-24: Mele, A. and Y. Obayashi (2013): “Credit Variance Swaps and Volatility Indexes”

 

  • “The Term Structure of Government Debt Uncertainty” (with Yoshiki Obayashi and Shihao Yang)  (July 2019)

A model to evaluate derivatives referenced to expected volatility in government bond markets: futures, volatility of volatility (options on futures), and calibrations to nearly 15 years of daily data

 

CEPR Discussion Paper 13874Download

 

  • “Market Timing with Implied Volatility Indices” (with Yoshiki Obayashi and Kshitij Dhingra) S&P Dow Jones Indices and Applied Academics — Research Strategy Note (August 2017)

Interest rate and equity volatilities as signals

 

Download Article

 

  • “Rate Fears Gauges and the Dynamics of Fixed Income and Equity Volatilities” (with Yoshiki Obayashi and Catherine Shalen) Journal of Banking and Finance 52, 256-265 (2015).

Compares empirical properties of Interest Rate Swap volatility with equity (SRVIX vs VIX)

 

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  • “Interest Rate Variance Swaps and the Pricing of Fixed Income Volatility” (with Yoshiki Obayashi), GARP Risk Professional: Quant Perspectives, March 1-8 (2014)

A succinct presentation of methodology underlying the pricing of variance swaps in the fixed income space

 

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  • “An Interest Rate Swap Volatility Index and Contract” (with Yoshiki Obayashi) (June 2012)

Develops security design to price fixed income volatility in a model-free fashion, the basis for the first interest rate volatility index maintained by an exchange

 

Technical white paper underlying the Cboe SRVIX Index of Interest Rate Swap Volatility

Link to Cboe website