Introduction to the CBOE/CBOT 10-year U.S. Treasury Note Volatility Index®
On Thursday, November 13, 2014, the CBOE Futures Exchange will launch futures on the CBOE/CBOT 10-year U.S. Treasury Note Volatility IndexSM (ticker symbol: VXTYN®). The VXTYN Index measures the expected volatility of the price of 10-year Treasury Note futures. The price of these futures is tied by arbitrage to the price of 10-year U.S. Treasury notes, which are a core instrument of the U.S. fixed income market. Futures on 10-year Treasury Notes are the most actively traded of all U.S. futures on U.S. Treasuries.
VXTYN provides a measure of expected volatility specific to the fixed income market. This is important because, historically, the volatilities of equities and Treasuries have often followed distinct paths. The index is calculated from CBOT's options on 10-year Treasury futures using the same methodology as VIX®. Consequently, VXTYN represents the variability of percentage changes in the price, as opposed to the yield of 10-year Treasury notes. Price and yield volatility are related to each other through duration, and yield volatility is typically higher than bond price volatility.