I want to use a volatility index as a measure of economic policy uncertainty. The index that I want to use is CBOE Volatility Index: VIX, but I don't know if I only can use this for US or if I can use it for another stock market. Do you have any idea if I can use it for other stock markets or what volatility index I could use for China? Thank you


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This question is better suited for Quantitative Finance StackExchange.

You should not rely on VIX for anything outside of the US (or not related to the S&P 500 index). The CBOE used to have a VIX China ETF (FXFXI) but it was discontinued last week. You can still look it up on CBOEs website, and compare it to VIX to see it is not a good idea to use VIX (SPX) for China. enter image description here

As you can see, the spikes are aligned at many times, but some times (the really important ones where not everything moves smoothly) can be very different.

You could use HSI Volatility Index if Hong Kong is of interest. There is some pressure from the regulator when it comes to Vol indices in China.

I am not too familiar with the market to be honest. However, you can look at this answer on quant.stackexchange to see that the VIX is not very different from a "simple" 1m at-the-money implied volatility (in value, not in how it is computed). As the chart below shows from this answer, the magnitudes and spikes are very similar.
enter image description here

Depending on what data sources you have access to, you may be able to quickly get this. On Bloomberg for example, you simply load OVDV with the index of choice and you will see the IVOL (look at 100% moneyness for 1m in this case).

  • $\begingroup$ As AKdemy said, the VIX only applies to the S&P500 index and hence the US. But indices all around the world have replicated the VIX or created similar indices. See e.g. onlinelibrary.wiley.com/doi/10.1111/acfi.12124 for the VHS in Hong Kong methodology $\endgroup$ Mar 29 at 8:56

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