Spike

Volatility Risk Indicator

The VIX (Cboe Volatility Index) is an index based on S&P 500 options that quantifies investors' expectation of market volatility. As high volatility is a recurrent symptom of stock market crashes, the VIX can be interpreted as an index of market fear for the coming month. The computation of the VIX is applied to several time horizons through a multitude of indices such as the VIX9D (Cboe 9-Day Volatility Index) or the VIX3M (Cboe 3-Month Volatility Index).

The Spike indicator takes a broad range of such S&P 500 market volatility measures and combines them to provide a robust and highly responsive risk signal that can be used to dynamically adjust equity exposures in short and mid term horizons.

Volatility as a Stress Indicator

Gathering Market Stress Information

The construction of the Spike indicator is based on the consideration of a number of volatility indices to frame US markets fear expectations. Each selected index provides information on the expected volatility over a certain period of time, and by aggregating this data, it becomes possible to get an overview of future market stress conditions.

Building an Equity Risk Barometer

Daily Market Risk Level

Alquant then synthesizes the various volatility signals selected to provide its members with a simple output, the Spike indicator, which reflects equity market's risk. Spike can be seen as an equity risk barometer, as its value quantifies the volatility environment of the stock market.

Manage your Equity Exposure

Simple Investing Method

The Spike indicator is inversely proportional to the equity exposure investors should apply to their portfolio. When its value is close to 0%, no risk is detected and the equity exposure of our portfolio can remain high. However, when its value reaches high ranges, it means that risk factors have been identified, and the investors should remain vigilant and reduce their exposure to equities.

Indicator Low Risk Indicator High Risk
Indicator High Risk

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