The 30-day VIX time horizon primarily captures what I call "event volatility" that is associated with scheduled events such as important economic data releases, earnings reports, as well as various scenarios associated with high-profile geopolitical and other events which are likely to cast a shadow over the next month.

By comparison, the 93-day time horizon of VXV guarantees it will encompass an entire earnings cycle, a full quarter of the economic-data-release cycle and two FOMC meetings. The VXV is more focused on long-term systemic threats, measuring something akin to "structural volatility" in the markets.

VIX vs. VXV

Investors who trade based on volatility signals usually look for signs that implied volatility is overextended to the upside or downside. This is traditionally done by comparing implied volatility measures such as the VIX to recent historical volatility or to previous implied volatility levels for the same implied volatility measure.

Since the launch of VXV in November 2007, investors have been able to use a third approach: comparing two different volatility indices with different fixed-time horizons to determine the extent to which short-term volatility expectations in the form of the VIX are aligned with longer-term volatility expectations in the form of the VXV.