Cboe began publishing the Cboe Volatility Index (VIX Index) in April 1993. To celebrate the past, present and future of VIX, we’ve spent the month of April sharing its rich history with special content about the people who played a role in connection with the VIX Index and helped grow the VIX options and futures marketplace.
On Tuesday, April 24, we gathered a number of those “VIX Index experts” in Cboe’s New York office for a panel discussion, “25 Years of the VIX Index: Its Origins, Evolution and the Market Today.” Ed Tilly welcomed guests, introducing the panel’s moderator and former Barron’s columnist, Steve Sears, as the man who named the VIX the “fear gauge – a catchy nickname that stuck despite our early – and constant – objections,” he said.
Steve, now Chief Market Strategist at StratiFi Technologies, began the panel by relating his personal connection to the VIX Index by describing how he covered the VIX Index as a journalist. He then asked the father of the VIX Index himself, Robert E. Whaley (current Valere Blair Potter Professor of Management and Director of the Financial Market Research Center at the Owen Graduate School of Management at Vanderbilt University) to describe his research process in developing the original VIX Index in 1993, which included time spent on sabbatical in France developing the index methodology.
Moving on, Joanne Hill, Chief Advisor for Research and Strategy at Cboe Vest, and Buzz Gregory, former Managing Director in charge of Macro Derivatives at Goldman Sachs, discussed industry reaction to the VIX Index and its reformulation in 2003. Finally, Dominic Salvino, VIX Option Specialist at Group One, discussed bringing a tradable product to market as the first DPM of VIX options.
A lively discussion ensued, wrapping up with Steve’s final question: “What is the one thing people need to know about VIX that they don’t?”
Professor Whaley clarified that while the “fear gauge” is a fun name, he views the VIX Index as the price of insurance – in that the VIX is based on SPX options prices, which reflect what market participants are actually willing to pay to hedge their risk.
Joanne emphasized the forward-looking, but short term, nature of the VIX Index, which provides market participants and observers with a measure of constant, 30-day expected volatility of the broad U.S. stock market. Because it is a 30-day window, events such as political elections or the U.K’s Brexit vote, can affect its reading. Joanne also expressed excitement for Cboe’s recently announced One-Year VIX Index (VIX1Y), which would serve as a nice complement to the standard VIX Index, she said.
Buzz wanted others to understand how the VIX Index opened the door for conversations about how the market is moving and what that might mean. Finally, Dominic stressed the importance of education.
After the panel, attendees gathered for drinks and canapes, including VIX25 cake pops and a signature cocktail, the Vixen.