On December 10 CBOE Holdings, Inc. announced that it has entered into a licensing agreement with MSCI Inc., a leading provider of investment decision support tools worldwide, to offer options trading on several MSCI indexes.  Under the agreement, in the U.S., options on the MSCI indexes will be solely listed for trading on the Chicago Board Options Exchange (CBOE). The six indexes included in the agreement are the MSCI EAFE Index, MSCI Emerging Markets Index, MSCI ACWI Index, MSCI USA Index, MSCI World Index and the MSCI ACWI ex-USA Index. CBOE plans to offer options trading in the first quarter of 2015, pending regulatory approval, on two of MSCI’s best-known indexes: the MSCI EAFE Index and the MSCI Emerging Markets Index.


The MSCI EAFE Index is recognized as the pre-eminent benchmark in the United States to measure international equity performance. It captures large- and mid-cap representation, and comprises the MSCI country indexes that represent developed markets outside of North America: Europe, Australasia and the Far East.  The MSCI EAFE Index is calculated in U.S. dollars on a real-time basis, and values are disseminated every 60 seconds during market trading hours. At the end of November 2014 the MSCI EAFE Index had these features –

  • 908 constituent stocks;
  • the three largest stocks in terms of market capitalization were Nestle (1.88% of index), Novartis (1.73%), and Roche Holding Genuss (1.64%);
  • companies from the United Kingdom and Japan accounted for more than 41% of the country weightings in the index (see the pie chart).

mm111-Country Weights EAFE & Emerging Mkts

The MSCI Emerging Markets Index captures large- and mid-cap representation across 23 emerging markets countries, and the index covers approximately 85% of the free-float-adjusted market capitalization in each country. At the end of November 2014 the MSCI Emerging Markets Index had these features –

  • had 833 constituent stocks,
  • the three largest stocks in terms of market capitalization were Samsung Electronics (3.22%), Taiwan Semiconductor Mfg. (2.82%), and Tencent Holdings (2.06%), and
  • companies from China accounted for more than 20% of the country weightings in the index (see pie chart).


As noted above, CBOE plans to offer (pending regulatory approval) In future years options on MSCI indexes. If an investor were to use these products for managing global equity portfolio risk, one of the most important factors to consider is the volatility of the indexes.

Here is a list of the average 30-day historic volatility estimates (in the period from January 2008 through November 2014) for six important instruments --

  • 16.6                 30-yr Treasury Bond Index (Citigroup)
  • 19.0                 MSCI EAFE Index (US$)
  • 19.1                 Gold Spot Price
  • 19.3                 MSCI Emerging Markets Index (US$)
  • 19.4                 S&P 500 Index
  • 33.5                 Crude Oil Spot Price (WTI)

As shown in the next chart below, the 30-day historic volatility can fluctuate substantially, and according to Bloomberg estimates the highest 30-day volatility since 2008 was more than 76 for the MSCI EAFE Index and more than 87 for the MSCI Emerging Markets Index.

mm222 - EAFE and volatility

Physically settled options on the EFA ETF and the EEM ETF are listed on CBOE. CBOE also offers more than 20 volatility indexes that are updated real-time measures of expected 30-day volatility, including the CBOE EFA ETF Volatility Index (VXEFA), and CBOE Emerging Markets ETF Volatility Index (VXEEM). www.cboe.com/volatility. Futures and options are offered on the VXEEM Index.

To learn more about tools to manage global portfolios and volatility, please visit CBOE web pages on -