The New South-African Volatility Index: New SAVI

6 Pages Posted: 10 Jan 2013

See all articles by Antonie Kotze

Antonie Kotze

Financial Chaos Theory; Department of Finance and Investment Management

Angelo Joseph

University of South Africa - School of Business Leadership

Rudolf Oosthuizen

JSE Securities Exchange

Date Written: December 8, 2009

Abstract

In 2007, the SAVI was launched as an index designed to measure the market’s expectation of the 3-month market volatility. The SAVI soon became the benchmark for measuring the market sentiment, and in this light can be thought of as a market “fear” index.

Two years later, in 2009 the Johannesburg Stock Exchange updated the SAVI to reflect a new way of measuring the expected volatility, one that is consistent with the theoretical framework, risk-management and the way traders trade options. The new SAVI is calculated as the at-the-money volatility adjusted for the volatility skew as determined by the actively traded options in the market.

The aim of this note is to introduce the new SAVI calculation method, and briefly discuss the benefits of the new SAVI.

Keywords: VIX, SAVI, volatility index, JSE, volatility swap, fear gauge

JEL Classification: C6, C63, G1, G13

Suggested Citation

Kotze, Antonie and Joseph, Angelo and Oosthuizen, Rudolf, The New South-African Volatility Index: New SAVI (December 8, 2009). Available at SSRN: https://ssrn.com/abstract=2198359 or http://dx.doi.org/10.2139/ssrn.2198359

Antonie Kotze (Contact Author)

Financial Chaos Theory ( email )

PO Box 16185
Doornfontein, 2028
South Africa

HOME PAGE: http://www.quantonline.co.za/

Department of Finance and Investment Management ( email )

PO Box 524
Auckland Park
Johannesburg, Gauteng 2006
South Africa

HOME PAGE: http://www.uj.ac.za

Angelo Joseph

University of South Africa - School of Business Leadership ( email )

P.O. Box 392
UNISA
Pretoria, Gauteng 0003
South Africa

Rudolf Oosthuizen

JSE Securities Exchange ( email )

United States

HOME PAGE: http://www.jse.co.za

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