Hang Seng to launch volatility index using CBOE VIX methodology

By Melissa Kory

Cleveland, Feb. 9 - Hang Seng Indexes Co. Ltd. will begin disseminating the Hang Seng Index Volatility index on Feb. 21, which will use the Chicago Board Options Exchange Volatility index (VIX) methodology, according to a news release.

The new volatility index will reflect expected equity market volatility over the next 30 days, using bid/ask quotes for Hang Seng index options traded on the derivatives market of Hong Kong Exchanges and Clearing Ltd. to calculate a weighted average of the implied volatility of the options.

The index was created under an agreement with Standard & Poor's with the permission of the CBOE.

Standard & Poor's will calculate and maintain the index, which is calculated back to Jan. 2, 2001.

"This new index will not only serve as a key market measure of risk, but will also lead to the development of a volatility trading and hedging market in Hong Kong," Robert Shakotko, managing director at S&P Indexes, said in the release.

Hang Seng is a subsidiary of Hong-Kong based commercial and investment bank Hang Seng Bank and an index compiler covering Hong Kong and mainland China markets.

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