Introduction to the CBOE Interest Rate Swap Volatility Index
The CBOE Interest Rate Swap Volatility Index ("CBOE SRVIXSM Index") is the first standardized volatility measure in the interest rate swap market, or indeed in the fixed-income market. It is designed to standardize and simplify trading in the interest rate swap market, much as the CBOE Volatility Index® (VIX®) does in the equity market. The interest rate swap market is the largest over-the-counter derivatives market, with notional amounts in the trillions.
Swaption expirations and swap tenors range from one month to thirty years and are denominated in multiple currencies. The CBOE SRVIX Index is based on 1 year swaptions on 10 year U.S. Dollar interest rate swaps, a benchmark for the USD interest rate swap market. The full ticker symbol of the index is SRVIXed, where e stands for a one year expiration and d for a ten year tenor.
Following the dominant swaption market convention, the CBOE SRVIX Index measures the "basis point" volatility of the forward swap rate, i.e. the volatility of changes in the forward swap rate (as opposed to percentage changes in the rate, as done for VIX). Similar to the CBOE VIX Index, the index is calculated from a strip of at-and out-of-the-money option prices but with a different weighting scheme.