Bloomberg News

VIX, Europe’s VStoxx Rise on Greek Debt Concern, Bank Reserves

June 16, 2011

June 16 (Bloomberg) -- The benchmark index for U.S. stock options climbed to a three-month high on concern that the Europe’s debt crisis is worsening and that regulators will require large banks to increase reserves. Europe’s VStoxx Index also rose.

The VIX, as the Chicago Board Options Exchange Volatility Index is known, rose 6.6 percent to 22.73 at 4:15 p.m. in New York. The index measures the cost of using options as insurance against declines in the Standard & Poor’s 500 Index, which gained 0.2 percent. The VIX and the S&P 500 move in opposite directions 81 percent of the time. The VStoxx Index, which measures the cost of protecting against a decline in shares on the Euro Stoxx 50 Index, added 5.9 percent to close at 24.43.

The MSCI All-Country World Index slid 0.7 percent to a three-month low, and the Stoxx Europe 600 Index fell 0.5 percent to 266.73. The euro slumped and European government default risk climbed to a record as Greek Prime Minister George Papandreou battled to keep his job and pass austerity measures.

“It’s something that’s becoming increasingly alarming from our perspective,” Dean Curnutt, president of New York-based Macro Risk Advisors LLC, which advises institutions on derivatives, said in an interview with Erik Schatzker on Bloomberg Television’s “Inside Track.” “Everyone’s looking at Greece.”

July VIX futures rose 4.8 percent to 21.95, while August’s increased 4.9 percent to 22.30.

--With assistance from Erik Schatzker and Kristen Boatright in New York. Editors: Joanna Ossinger, Stephen Kleege

To contact the reporter on this story: Jeff Kearns in New York at jkearns3@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net


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