Design And Application Of Volatility Index Based On SSE 50ETF Option

Volatility plays a significant role in financial markets as it plays an important role in pricing, trading strategies and risk control. The financial market can not be lack of volatility, but when the volatility is too large to make the investors worry, it makes the market unattractive. Thus, a precise measure of market volatility is necessary.The VIX index which introduced by CBOE is a successful model of measuring the volatility in the financial markets. The index achieves the purpose of risk prevention and guiding transactions through reflecting people’s consensus forecast of future volatility. Now it is widely used in the field of asset pricing, risk management and be the benchmark index of the US stock market volatility. As the foreign market has a long research on VIX, this aspect is almost empty in China because of the late started options, this paper attempts to do something in the development of Chinese Volatility Index.Based on the widely recognized VIX index which introduced by CBOE, We try to construct an appropriate volatility index to provide investors risk warnings to some extent. The index is compiled according to the principles and combined with China’s actual situation. A series of studies in this paper will focus on the preparation method and its statistical characteristics and the functioning of markets.Firstly, this article introduces the background and significance, the train of thought, the way of the search of this topic. Secondly it introduces the relevant theory of the index, which focuses on the preparation method of the CBOT VIX. Thirdly, it introduces the preparation of China’s Volatility index which based on China’s trading rules of options market. Fourthly, it introduces the some analysis of China’s Volatility index and its prediction effect; Lastly, it summarizes the paper and gives some policy recommendations of our country.