The S&P/JPX JGB VIX began the month at an all-time historical low (1.11) and remained near that levelfor three weeks. Then late in the day on July 20, 2018, there were several news reports that the Bank of Japan (BoJ) would be debating policy changes at their upcoming Monetary Policy Meeting (July 30-31, 2018). As measured by the S&P/JPX JGB VIX, this sent shockwaves through the markets in the trading sessions to follow and, as a result, the BoJ performed defensive operations to keep yields from skyrocketing ahead of the meeting.

S&P/JPX JGB VIX continued to break new ground to the downside in June and finished the month at all-time low levels (6/29 close 1.13), a leading indicator that the Bank of Japan’s (BoJ) quest to stamp out volatility has so far been successful. 

This applied methodology paper introduces an intuitive framework for constructing robust market timing signals based on implied volatility indices with a focus on downside avoidance.