CBOE Launches Implied Correlation Index
By Bill Luby on July 24, 2009 | More Posts By Bill Luby | Author's Website
Volatility watchers and risk managers have a new index to watch, starting next Monday: the CBOE S&P 500 Implied Correlation Index. The CBOE announced the new index in a press release yesterday, noting that the Implied Correlation Index will be tied to two different option maturities - January 2010 (ICJ) and January 2011 (JCJ). The values of ICJ and JCJ will be disseminated by the CBOE every 15 seconds during the trading day, as is done with the VIX.
The Implied Correlation Index does not calculate the correlations among the entire S&P 500 index (^GSPC). Instead, it utilizes a “tracking basket” of the 50 largest components of the SPX as measured by market capitalization. For more on the calculations involved in the Implied Correlation Index and related materials, check out the Implied Correlation Index splash page, the Implied Correlation Index white paper and historical data going back to the beginning of 2007.
I will discuss this index on the blog going forward, as it is clearly an important piece of the VIX valuation mystery. For now, readers may be interested to see how SPX component correlations (blue line) have compared with the VIX (^VIX) (red line) during the recent bear market.

[source: CBOE]
Societe Generale Tells Investors How To Prepare For Potential “Global Collapse”
Month To Date Review Of The Market
Stock Picks For Monday: Nanometrics, Melco Crown Entertainment, MetroPCS Communications And Cell Therapeutics
Has Gold Just Broken Out Of Its Trend Channel?
One Reason Why The US Dollar Might Rise
Bay Street Stocks Slip Slightly Again - Canadian Commentary - 1 day ago
Stocks Close Mostly Lower Amid Disappointing Quarterly Results - U.S. Commentary - 1 day ago
Bay Street Stocks Linger Slightly Below Unchanged Level - Canadian Commentary - 1 day ago
Stocks Remain Stuck In The Red In Mid-Afternoon Trading - U.S Commentary - 1 day ago
European Markets Fall, Led By Banks, Oils - European Commentary - 1 day ago


