Beyond VIX: Model-Free Spot Volatility and Tail Indices from Short-Dated Options

The Cboe Global Markets VIX index is a key benchmark for future expected volatility used by academics and practitioners alike. The VIX combines actual expectations of future volatility along with the pricing of volatility and tail risk over the coming month into one aggregate volatility measure. We take advantage of two recently proposed option-based measures of volatility by Cboe, spot volatility (SPOTVOL) and left tail volatility (LTV), to decompose the VIX index into separate components that pertain to short-term volatility expectations and downside tail risk concerns by investors, plus a term structure within the one-month horizon. We exemplify the auxiliary information content of the new volatility indices through applications, and delve into the discussion of why the VIX has been unusually low recently.