Enhancing portfolio performance with the implied volatility index

Abstract

Implied volatility has become a popular asset class as investors seek more effective diversifiers for investment portfolios after the recent global financial crisis. This paper provides a close examination of the relationship between the Australian Implied Volatility Index (A-VIX) and its underlying asset, the S&P/ASX 200 Index. It also highlights the limitations of A-VIX futures, which were introduced in October 2013, as a diversifier for investment portfolios.