The 1993 Index

Whaley, OEX, and the first public volatility benchmark

The original VIX was an at-the-money implied-volatility average on S&P 100 options. It created the public language of a volatility benchmark and, later, the ticker VXO.

On 19 January 1993 the Chicago Board Options Exchange announced real-time dissemination of a Market Volatility Index. The calculation that reached the tape that year is not the calculation that now settles VX futures. Treating them as one series is the most common historiographic error in volatility law and practice.

Why the S&P 100

In the early 1990s the Cboe S&P 100 Index option (OEX) was the liquid American-style index option. SPX liquidity had not yet displaced it. Whaley’s construction, commissioned by the Cboe and elaborated in “Derivatives on Market Volatility: Hedging Tools Long Overdue,” inverted Black–Scholes-style implied volatilities from eight near-the-money OEX calls and puts straddling 30 calendar days and averaged them. The result was a 30-day at-the-money implied volatility, quoted in percent, updated throughout the session.

VIX 1.0 (pedagogical reduction of Whaley 1993)

Take the two nearest OEX expiries that bracket 30 calendar days.

At each expiry, invert four option prices (call/put × two neighboring strikes) for Black–Scholes implied vol.

Interpolate those IVs to a synthetic 30-day, at-the-money tenor.

Publish 100 × that implied volatility.

The operational Cboe implementation used specific weighting and nearby/second-nearby mechanics. The point for this book is architectural: VIX 1.0 is a model-dependent ATM average, not a strip of OTM options.

What the first index could and could not do

As a journalistic device the 1993 VIX was immediately successful. It gave equity markets a single number that rose when option prices rose. As a hedge construction it was weak. Because it used only near-the-money options, it was nearly silent on crash premia sitting in OTM puts. Because it inverted a diffusion model, a jump in the underlying could move implied vol in ways the formula did not interpret. Because OEX options were American, early-exercise premia contaminated the inversion. And because there was no listed futures contract until 2004—and even then the futures would attach to a different formula—the 1993 index remained a published statistic rather than a deliverable.

Cboe later redesignated the original series as VXO, the S&P 100 Volatility Index, and reserved VIX for the 2003 SPX construction. Historical research that splices VXO into VIX without a splice note is comparing two different legal objects. For event studies around 1987–2003, VXO (including the reconstructed pre-1993 series Cboe published) is the relevant tape. For any listed VIX derivative, only the post-2003 methodology governs.

The legal seed

Even without listed futures, the 1993 launch planted three legal facts. First, Cboe claimed a named methodology and a mark. Second, the index was calculated from exchange option quotes, so its integrity was tied to the quality of the options market Cboe itself operated. Third, the publication created a reliance community—journalists, risk managers, later structurers—whose reasonable expectations would eventually matter in disclosure litigation over products that used the word “VIX” as if it were an investable asset.

Whaley’s original policy argument remains the right one for replacement design: a volatility benchmark is overdue when the market already trades volatility implicitly and lacks a public, contractible summary. The question in 2026 is no longer whether such a summary should exist. It is whether a second-moment, 30-day, SPX-only summary is still the summary the law should privilege.