The relaunch of the Chicago Board Options Exchange Market Volatility Index (VIX), which will introduce the ability to trade futures and forwards on the index, will encourage more trading strategies that play off the equity and credit derivatives markets. Alex Reyfman, U.S. credit derivatives strategist at Goldman Sachs in New York, said the improvements made to the index, combined with increasing interest in trading options on credit-default swaps, will better allow strategies that trade aggregate spread volatility on default spreads against equity volatility. The old VIX had been difficult to hedge, which restricted the number of players employing such strategies. The new index will encourage traders such as hedge funds and proprietary traders, to trade across the two asset classes, he noted.
Devesh Shah, head of index options trading at Goldman Sachs in New York, added that enabling futures and over-the-counter products to be linked to the new VIX will make it easier for end users to both manage their risk as well as take views on future levels of implied volatility. The VIX, which measures the volatility of the U.S. equity market, was relaunched on Sept. 22.
