OREANDA-NEWS. Historical volatility is based on the observed and measured swings of the past, whilst implied volatility provides a measure for potential volatility in the future. Both are annualized measures and important to the pricing of structured warrants. Implied volatility, which is forward looking, is based on the pricing of options associated with the Index or stock. For the Hang Seng Index, 30 day historical volatility at 30.6% is currently similar to implied volatility at 30.3%. In the longer term, 180 day historical volatility of the Hang Seng Index is 21.6%.

Meanwhile the Straits Times Index (STI) maintains 30 day historical volatility of 22.8% and 180 day historical volatility of 12.6%. Please note the STI does not have an associated suite of option markets thus implied volatilities are not readily available. However, the STI, is 95% correlated to MSCI Singapore Index (SiMSCI) futures.  The SiMSCI futures maintains 30 day historical volatility of 25.9% and 180 day historical volatility of 14.3%, with implied volatility of 19.8%.

 

10 Day Historical Volatility

30 Day Historical Volatility

Implied Volatility

Hang Seng Index

21.6

30.6

30.3

FTSE China A50 Index

45.1

52.6

41.4*

STI**

12.6

22.8

N/A

SiMSCI**

14.3

25.9

19.8

The 10 day historical volatility of the MSCI AC Asia Index decreased from 14.3% on 29 April to 13.9% as of 25 May.

Over the same period, the 10 day historical volatility of CSI 300 and Nikkei 225 dipped from 11.4% to 8.0% and 39.4% to 15.3% whereas the HSI and STI seen an increase from 17.5% to 20.5% and 12.0% to 14.4% respectively.

Structured warrants are an example of Specified Investment Products (SIPs). The MAS has introduced measures for intermediaries to safeguard the interests of individual investors investing in SIPs, which are products with features that might be more complex in nature.