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Our YLDVOL® index (short for ‘Yield Volatility’) represents the constant maturity 30-day implied volatility, expressed in annualized basis-points terms, on the Ten Year US Treasury Note future. The index is highly intuitive, simple for investors to relate to, and accords with the nomenclature of the rates market.
YLDVOL® represents the amount of expected movement in the yield over the coming year, implied from 30-day option prices. For example, an index value of 80 points roughly translates to the expected movement in the ten year yield of +/- 80 basis points from its present level over the coming year (an option’s implied 68% confidence interval – or 1 standard deviation). YLDVOL® was designed after extensive consultation with industry practitioners to ensure that it accurately reflects the specific requirements of the interest rate market.
Our proprietary methodology embodies the characteristics of volatility that make it such an attractive investment proposition for investors, but importantly it accords with the manner in which interest rate traders are used to viewing their risks and matches the characteristics of their exposures.