VIX value based on historic volatility

Discussion in 'Financial Futures' started by balaji, Jan 26, 2018.

  1. balaji

    balaji

    Hi, is there any way to find out what the value of VIX should be if SPX options were repriced to reflect historic volatility (say, HV30) instead of the current SPX option prices which reflect implied volatility? I am looking for a way to figure out if VIX is undervalued or overvalued based on computing a historic-volatility-based value for it and comparing it to spot VIX. Thank you.
     
  2. truetype

    truetype

    You can do the math yourself, or type historical vols into the relevant fields on your Bloomberg.
     
  3. balaji

    balaji

    I am not sure you understand. I am not looking for historic prices of VIX. That I can get from yahoo finance. I want to get the current value of vix based on historic volatility of SPX. I don't have access to Bloomberg, but looking at those screenshots, I don't see anything there that will tell me what SPX option prices should be based on historic volatility. At least if I can get that, I can do the last step in the calculation myself and get the VIX price based on those option prices, but going all the way from historic volatility to options prices to VIX is a little much for me.
     
  4. cvds16

    cvds16

    you are going about this totally the wrong way: vix has nothing to do with historical vol, but with implied vol; if you can predict implied vol you are nothing less of a genius ... I doubt though you are in fact so ...
     
    tommcginnis likes this.
  5. truetype

    truetype

    Yes, I do understand.
    That's what I was trying to tell you. You can simply input the historical vol, and BBG will tell you the value of the option using that vol rather than the implied. But anyway you can figure it out yourself with a simple B-S calculator.
     
  6. balaji

    balaji

    Thank you, truetype. Interesting concept. Is there any way to do this on the publicly available part of the bloomberg website? I don't have access to a bloomberg terminal.

    cvds16: I am not trying to predict the value of VIX or implied volatility. I am just trying to understand objectively how much higher IV is compared to HV in the current pricing of VIX. Think of it as comparing the PE of a stock right now to the historical average of PE for that stock. Does that tell you what the stock is going to do? Of course not. Then why bother doing it? In fact, why bother with history at all since the future can't be predicted?
     
  7. cvds16

    cvds16

    what would it have helped you to know the average historical implied vol for the indices for example: the last years we have been only going down and down, with the occasional spike here and there ... what would you do with your 'knowledge' ? ? ?
     
    tommcginnis likes this.
  8. cvds16

    cvds16

    During the crashes of 2000 and 2008 it only went up and up seeing new highs that were totally out of line with historical implied vol ... what would you have done ? Shorted it ? You would have been totally killed ...
     
    tommcginnis likes this.
  9. truetype

    truetype

    I doubt it, but I haven't looked.

    In any case, ATM options are ~linear in vol, so just multiply the option price by (historic/implied) to get what you want.
     
  10. balaji

    balaji

    Thank you, truetype. That is quick and easy to do, and probably close enough for my purposes.
     
    #10     Jan 26, 2018