Historical Volatility Rolling Indexes: 2004 — 2012

Friday, March 16th, 2012 | Vance Harwood

I have generated the trading day values for the following rolling indexes of VIX volatility futures for March 26, 2004 through February 3, 2012.

  • Month 1-2 rolling index,  constant weighted average 1 month
  • Month 2-3 rolling index, constant weighted average 2 months
  • Month 3 -4 rolling index, constant weighted average 3 months
  • Month 4-5  rolling index, constant weighted average 4 months
  • Month 4-5-6-7 rolling index, constant weighted average 5 months

These indexes, or ones like them are required if you want to backtest various ETP products, or evaluate your own volatility strategy.

Rolling Volatility 2004 to 2011, click to enlarge

The algorithms for generating these indexes are documented in the prospectuses of volatility ETNs or ETFs.    UBS’s long fund prospectus is a good example.  Currently they are the only provider of ETPs that offers products based on all of these indexes.  See Volatility tickers for the current universe of volatility ETPs and their associated reference indexes.    The futures settlement data required for these index calculations is available on the CBOE website—in the form of 95+ separate spreadsheets.  To make the calculation of these indexes tractable I created a master spreadsheet  that integrates the futures settlement data into a single sheet.  See this post for more information about that spreadsheet.

These rolling indexes don’t exactly match the official indexes (SPVXSTR, SPVIX2MT, SPVIX3MT, SPVIX4MT, and SPVXMTR), but when I compare my results to the values freely available on Bloomberg my results track within +-0.03% for the values I have sampled from December 2008 to December 2011  for each of the indexes.  See this readme file for more information on accuracy comparisons.  The official indexes start on December 20th, 2005, but I pushed them back to the beginning of VIX volatility futures trading which was in March 2004 by extrapolating mssing front month data.

These indexes do reflect the impact of 91 day treasury bills on their overall performance.   They are currently yielding a whopping .0031% on an annualized basis, but in February 2007 they were yielding over 5%— things have changed a bit…   The indexes do not include ETN fees, they vary from fund to fund, and aren’t included in the indexes themselves.

In working through the details of the algorithms there were no major surprises, but there were some subtleties—like discovering the market was closed on January 2, 2007 to commemorate President Reagan.   One significant detail is that the day-to-day rolling of the futures is done on a dollar weighted basis.  For example on the rolling 1 to 2 month index, if there are a total of 21 trading days in the current first month futures, it is not 1/21 of the contracts that are rolled over to the second month each day—it’s 1/21th of the dollar value of the index that is rolled over.  The reason for this distinction is that the goal of the index is to give a constant duration or maturity (e.g., 2 months),  if the roll amount isn’t dollar weighted then contango / backwardation would shift that duration one way or the other.

I am making these 5 indexes available for purchase, individually, or as a complete package.  If you cannot see purchase information immdediately below then please click this link to the stand-alone post and look at the bottom of the page.
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SFI Volatility Rolling Indexes
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#OptionPriceDownloadFile Size
1Rolling Index 1 Month Maturity$20.00SFI Volatility Rolling Index 1 Month Maturity 116.5KB
2Rolling Index 2 Month Maturity$20.00SFI Volatility Rolling Index 2 Month Maturity 116KB
3Rolling Index 3 Month Maturity$20.00SFI Volatility Rolling Index 3 Month Maturity 116KB
4Rolling Index 4 Month Maturity$20.00SFI Volatility Rolling Index 4 Month Maturity 115.5KB
5Rolling Index Medium Term Maturity$20.00SFI Volatility Rolling Index 4/5/6/7 Month Maturity 115.5KB
6Rolling Index-all 5 Maturities$75.00SFI Volatility Rolling Index 1 to 5 Month Maturity 178.5KB
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Friday, March 16th, 2012 | Vance Harwood
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  • mn

    kudos to you for accurately calculating these indices underlying the volatility etns … the amount of inaccurate information on various blogs and websites about products like the vxx is staggering

  • mn

    seems to me that the main point that people don’t understand is the detail you mentioned in the last paragraph about how the rolling is done on a dollar-weighted basis

  • vance3h

    Hi mn,
    Thanks!. Yes, the dollar weighting is a tripping point. Those that try to deal just with VIX futures contracts get caught on that one, the percentage change calculation is also tricky, if done incorrectly it can introduce an error term that only shows up when there are big moves.

    – Vance


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