Cboe Expands Its Implied Correlation Index Suite with Eight New Indices

Fazzaco learned that Cboe Global Markets, Inc. (Cboe: CBOE), a leading provider of global market infrastructure and tradable products, has added eight new indices to expand its Cboe Implied Correlation Index suite, which enables market participants to access a full suite of volatility-related indices across a range of maturities and skews to help gain a more complete view of the potential factors driving volatility in the equity markets.

According to the press release, the Cboe Implied Correlation Indices are the first widely disseminated market estimates of the average correlation of the stocks that comprise the S&P 500® Index (SPX). 

With the benchmark indices, market participants are able to gain insight into the relative cost of SPX options compared to the price of options on individual stocks that comprise the SPX so as to identify the potential drivers of implied volatility for the SPX and evaluate the potential implications of major macroeconomic events on market expectations.

For market participants, correlation is generally a risk control tool through which they can set systematic risk exposure levels and maximize risk diversification benefits. Besides, they also typically closely monitor correlation levels to help ensure their risk exposures line up with their risk appetite levels and to develop risk transfer strategies as correlation is essentially a statistical measure of diversification.

The eight new indices, which similarly utilize Cboe's innovative, proprietary methodology to calculate implied correlation, are complement to Cboe's existing three-month Implied Correlation Index (COR3M).

​"As the pioneer in the volatility space, Cboe has created more than 450 volatility and derivatives-based indices and we are pleased to expand our offerings further with these eight implied correlation indices," said Rob Hocking, Senior Vice President and Head of Derivatives Strategy at Cboe Global Markets. "In today's market environment, investors are demanding greater data and insights to gain a better understanding of market movements and the drivers impacting correlation in the equity markets. These additional indices can provide market participants with a view of correlation surfaces and market expectations of implied volatility across time and delta-shocks, offering the transparency they need to help effectively construct trading strategies and hedge underlying risk."

As Fazzaco reported recently, Cboe Global Markets has witnessed a new record in SPX Options monthly ADV in June 2022. Prior to that, the company signed a licensing agreement with Validus Macro Strategies​ to create the framework for their cooperation to develop new indices and solutions.