January 31, 2011 / 10:01 AM / 7 years ago

Hang Seng indexes to launch Hong Kong's "VIX"

 HONG KONG, Jan 31 (Reuters) - Hong Kong will get its own
volatility index next month paving the way for financial products
that allow investors to hedge against excessive market movements.
 Hang Seng Indexes Company, the company which owns and manages
the benchmark indexes in Hong Kong including the Hang Seng index
.HSI, said it would launch the HSI Volatility index or "VHSI"
on Feb. 21.
 The index will be modeled on the lines of the Chicago Board
of Exchanges VIX index .VIX in that it measures the
30-calendar-day expected volatility of the Hang Seng index using
prices of options traded on the index.
 The VIX is based on options on the S&P 500 .SPX. The index
bounced off near record lows on Friday after unrest in Egypt
sparked a sell-off in risky assets worldwide. [ID:nL3E7CV026]
 Volatility had fallen broadly amid a rally in stocks since
early 2009, hitting hedge funds who trade volatility as an asset
class using option contracts. [ID:nL3E7CP09P]
 "The VHSI provides a useful indicator in hedging against the
potential downturn of the underlying stock market," said the Hang
Seng Indexes Company in a statement.
 The index will be calculated and disseminated real time
starting Feb. 21 and is backdated to Jan. 2, 2001.
 The index provider said the VHSI would have been at 18.8 at
end-2010, down from a year-high of 39.3 in May around the time
that news of a European debt crisis first surfaced, and off a
record high of 104.3 after Lehman Brothers declared bankruptcy.

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