The VVIX Index is an index that measures the implied volatility of the VIX, often referred to as the “volatility of volatility.” In crypto options trading, an analogous index would reflect the expected fluctuations in the implied volatility of a primary crypto asset’s options market. It quantifies the market’s expectation of future volatility changes.
Mechanism
Conceptually, the VVIX is constructed from the prices of options on the VIX itself. For a crypto equivalent, it would derive from the implied volatilities of options written on a crypto volatility index. This involves calculating the expected variance of the volatility index’s future movements. A higher VVIX indicates market participants anticipate greater future changes in implied volatility.
Methodology
Quantifying a VVIX equivalent requires a robust options market for the underlying crypto volatility index, allowing for the observation of a range of strike prices and expiration dates. The computation typically employs a model-free approach, summing weighted option prices to extract the market’s expectation of future volatility movements. For crypto options, such an index would offer institutional traders a measure of higher-order risk, enabling more nuanced hedging or speculative strategies against shifts in market uncertainty.
We use cookies to personalize content and marketing, and to analyze our traffic. This helps us maintain the quality of our free resources. manage your preferences below.
Detailed Cookie Preferences
This helps support our free resources through personalized marketing efforts and promotions.
Analytics cookies help us understand how visitors interact with our website, improving user experience and website performance.
Personalization cookies enable us to customize the content and features of our site based on your interactions, offering a more tailored experience.
