Methodology

TermDex®: One Number for the Whole Curve

How the slope of the VolDex® term structure compresses into a single gauge — and why it's read against each asset's own history, not a fixed threshold.

The term structure is a shape, and shapes are hard to track over time or compare across assets. TermDex® solves that by reducing the whole curve to one number: the slope of the VolDex line. This page is the methodology behind it.

From curve to slope

Start with VolDex computed at the ten fixed tenors — 7 through 360 days. TermDex measures how that series rises or falls across the term: the relationship between the short end and the long end. A curve that climbs steadily from front to back produces a positive TermDex; a curve where the front sits above the back produces a negative one. The steeper the slope in either direction, the larger the magnitude.

Because it's built from the same fixed tenors and the same ATM calculation on every underlying, TermDex is directly comparable — SPY today versus SPY a year ago, or SPY versus HYG right now.

Why percentiles, not fixed thresholds

"Negative is stress" is the direction, but a raw number means little on its own — different assets carry different normal slopes. Bonds, credit, gold and equities don't share a baseline. So TermDex is percentile-classified against each asset's own history: the reading you see is positioned within that underlying's distribution, not against a universal cutoff.

This is why "the curve is steeper than it's been all year" is a real signal and "TermDex is +X" is not. A reading in an asset's 5th percentile is a meaningfully different statement than the same raw number in its 50th. The percentile is the regime; the raw slope is just the input.

Anxiety vs. complacency

Read that way, TermDex becomes a gauge of short-term anxiety versus complacency relative to the longer-term outlook. A reading deep in the low percentiles says the front is being bid up hard against the back — acute near-term fear. A reading high in the distribution says the opposite: the market is unusually relaxed about the near term, which is its own kind of information for anyone selling front premium.

How to use it

Track TermDex over time to see regimes shift before they're obvious in price. Scan it across the eleven underlyings to locate where stress lives (the March 2023 banking episode is the canonical example). And use the percentile, not the sign alone, to judge how extreme a reading really is.

Educational content from Nations Indexes. VolDex® and TermDex® are registered marks of Nations Indexes. Nothing here is investment advice.