A volatility index is an index which tracks the expectations of volatility of an equity index over the next 30-day period. It is often referred to as the fear index or fear gauge.
The principle volatility index is the VIX which measures investors’ expectations of volatility for the S&P 500 index. It is quoted in percentage points per annum and translates more or less into the expected movement in the S&P 500 over the coming 30-day period, which is then annualised. A VIX value of 30% implies an annualised implied volatility of 30%.
The VSTOXX measures the volatility of the EURO Stoxx 50 index.