Introducing the Cryptocurrency VIX: CVIX

Abstract

We present a theoretical and empirical methodology that reflects the Cryptocurrency version of VIX, which we name it as CVIX (Crypto VIX), and captures the future 30 days forward Crypto risk (fear). Our framework is built on idiosyncratic and systematic Crypto risk, and is not based on the option implied volatility model, that developed by the CBOE for the S&P Volatility Index VIX. For back testing, our CVIX projected with accuracy of over 89% the 30 days forward Crypto realized volatility. We apply our CVIX framework on the S&P index, and show it projects the 30 days forward realized S&P volatility with accuracy of 91.8%, while VIX’s accuracy is only 63.4%. Our framework is superior over the option based VIX due to the fact that the option market does not represents all the stock market, and our methodology accounts properly for the idiosyncratic risk.

Keywords: Crypto currency, Bitcoin, speculative asset, productive asset, VIX, Cryptocurrency VIX, CVIX.

JEL Classification: G10, G12