Hi, is there any way to find out what the value of VIX should be if SPX options were repriced to reflect historic volatility (say, HV30) instead of the current SPX option prices which reflect implied volatility? I am looking for a way to figure out if VIX is undervalued or overvalued based on computing a historic-volatility-based value for it and comparing it to spot VIX. Thank you.
VIX value based on historic volatility
- Thread starter balaji
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You can do the math yourself, or type historical vols into the relevant fields on your Bloomberg.
I am not sure you understand. I am not looking for historic prices of VIX. That I can get from yahoo finance. I want to get the current value of vix based on historic volatility of SPX. I don't have access to Bloomberg, but looking at those screenshots, I don't see anything there that will tell me what SPX option prices should be based on historic volatility. At least if I can get that, I can do the last step in the calculation myself and get the VIX price based on those option prices, but going all the way from historic volatility to options prices to VIX is a little much for me.
Yes, I do understand.
That's what I was trying to tell you. You can simply input the historical vol, and BBG will tell you the value of the option using that vol rather than the implied. But anyway you can figure it out yourself with a simple B-S calculator.
Thank you, truetype. Interesting concept. Is there any way to do this on the publicly available part of the bloomberg website? I don't have access to a bloomberg terminal.
cvds16: I am not trying to predict the value of VIX or implied volatility. I am just trying to understand objectively how much higher IV is compared to HV in the current pricing of VIX. Think of it as comparing the PE of a stock right now to the historical average of PE for that stock. Does that tell you what the stock is going to do? Of course not. Then why bother doing it? In fact, why bother with history at all since the future can't be predicted?
cvds16: I am not trying to predict the value of VIX or implied volatility. I am just trying to understand objectively how much higher IV is compared to HV in the current pricing of VIX. Think of it as comparing the PE of a stock right now to the historical average of PE for that stock. Does that tell you what the stock is going to do? Of course not. Then why bother doing it? In fact, why bother with history at all since the future can't be predicted?
I doubt it, but I haven't looked.
In any case, ATM options are ~linear in vol, so just multiply the option price by (historic/implied) to get what you want.