Method and system for creating a volatility benchmark index

1. A non-transitory computer-readable medium containing processor executable program instructions for creating a volatility benchmark index, the instructions configured for causing a processor to execute the steps of:

storing a value of a Treasury bill account less a mark-to-market value of at least one of a volatility-based future or option in a memory;

calculating a value reflecting a volatility benchmark on the processor based on the stored value; and

wherein the value reflecting a volatility benchmark is calculated according to the formula:

VPD t =M t =(1 +r t-1 ) VPD t-1 −M ult N last ( F t −F t-1 )

where VPD t is a VIX premium index value at date t, M t is a Treasury bill balance on date t, r t-1 is an effective Treasury bill rate from date t−1 to date t, N last is a number of futures sold at a last roll date, F t is a daily settlement price of futures at date t, and M ult is a multiplier of the futures.

2. The non-transitory computer-readable medium of claim 1 , wherein on a roll date the processor executable program instructions are configured to cause the processor to calculate VPD t according to the formula:

VPD t =(1 +r t-1 ) VPD t-1 −M ult ( N last ( SOQ t −F t-1 )− N new ( F t −F bid ))

where SOQ t is a final settlement price of the expiring futures, N new is the number of new futures and F bid is an opening bid price of volatility-based futures.

3. A non-transitory computer-readable medium containing processor executable program instructions for creating a volatility benchmark index, the instructions configured for causing a processor to execute the steps of:

storing a closing value of a Treasury bill account plus a mark-to-market value of at least one of a volatility-based future or option in a memory;

calculating a value reflecting a volatility benchmark on the processor based on the stored closing value; and

wherein the value reflecting a volatility benchmark is calculated according to the formula:

VPD t =M t +100*10 N last C t

where M t is a Treasury bill balance at a close of date t, N last is a number of futures sold and 10 N last is a number of volatility index (VIX) options bought at a last roll date, and C t is an average of bid and ask quotes of VIX calls at the close on date t.

4. The non-transitory computer-readable medium of claim 3 , wherein the Treasury bill balance is calculated by compounding a previous closing Treasury balance at a three-month Treasury bill rate and netting a cash flow from VIX futures.

5. A method for creating a volatility benchmark index, the method comprising:

in a trading system having a memory and a processor in communication with the memory, the processor:

storing in the memory a value of a Treasury bill account less a mark-to-market value of at least one of a volatility-based future or option in a memory;

calculating a value reflecting a volatility benchmark on the processor based on the stored value; and

wherein the value reflecting a volatility benchmark is calculated according to the formula:

VPD t =M t =(1 +r t-1 ) VPD t-1 −M ult N last ( F t −F t-1 )

where VPD t is a VIX premium index value at date t, M t is a Treasury bill balance on date t, r t-1 is an effective Treasury bill rate from date t−1 to date t, N last is a number of futures sold at a last roll date, F t is a daily settlement price of futures at date t, and M ult is a multiplier of the futures.

6. The method of claim 5 , further comprising, on a roll date, the processor calculating VPD t according to the formula:

VPD t =(1 +r t-1 ) VPD t-1 −M ult ( N last ( SOQ t −F t-1 )− N new ( F t −F bid ))

where SOQ t is a final settlement price of the expiring futures, N new is the number of new futures and F bid is an opening bid price of volatility-based futures.