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Show 237 THE UNIVERSITY OF UTAH Since its first introduction in 1993, the Chicago Board Option Exchange's (CBOE's) Market Volatility Index, the VIX, has become more and more popular among traders and investors in the market. If used correctly, not only is the VIX able to provide traders with useful informa-tion to evaluate the current market conditions but also generate great returns for investors, especially in the contemporary low-interest rate environment. Therefore, it is essential to have a thorough understanding of this volatility index to fully take advantage of its usefulness and avoid misinterpretation. The purpose of this paper is fourfold: First, to provide an overview of the VIX, its evolution, and its relation with the stock market by statistical analysis. Second, to illustrate some typical financial products using this volatility index as the underlying assets as well as related speculative strategies. Third, to demonstrate its effects on portfolio diversifica-tion. Fourth, to show the application of the VIX to corporate finance. THE VIX AND ITS APPLICATIONS IN THE MARKET Hy Chau (James Schallheim) Department of Finance University of Utah honors college Hy Chau James Schallheim |