After last week’s doldrums, the Chinese government’s surprise devaluation of the yuan breathed life into CBOE’s VIX Suite: VIX, TYVIX, EUVIX, BPVIX and JYVIX. Volatilities fluctuated as the events of the week unfolded – initially climbing on Tuesday when the devaluation occurred and prompted a number of analysts to suggest the Federal Reserve’s target rate increase could be deferred to next year. Volatilities in VIX and TYVIX subsided somewhat in midweek following mostly positive U.S. economic releases (U.S. July retail sales were up 0.6 percent, July industrial production also was up 0.6 percent and the July producer-price index was up 0.2%), but volatilities nonetheless finished the week higher than last Friday. The currencies group saw similar trepidations, but only JYVIX has advanced from last Friday.

Figure 1: Weekly Volatility Update

It Was the Second Time This Year That a FX Shock Hit the VIXes

TYVIX2

Following Futures on Treasury Volatility Since their inception in November 2014, futures on TYVIX have followed the tribulations of the spot index and this week is no different.  With a relatively flat term structure, the average levels of current and future expected volatility are now converging to 6, close to their median value since last November.

Figure 3. Futures on TYVIX (Ticker VXTY) TYVIX3

 

 

 

 

 

 

 

 

Post written by Catherine Shalen, CBOE Research