CME Group launches new implied volatility index

Derivatives marketplace CME Group announced launching a suite of new implied volatility benchmark indexes using the methodology from CME Group Volatility Index (CVOL). The company started with eight implied volatility indexes on its 10-Year Treasury Note futures and G5 FX currency pair futures. The CVOL suite of indexes will be expanded to include benchmarks across all major asset classes in the first half of 2021.

Derek Sammann, CME Group Senior Managing Director and Global Head of Commodities and Options Products said:

Derek Sammann, CME Group

Derek Sammann

Traders already rely on CME Group’s deep and liquid options markets to monitor, hedge against, or express views on volatility across all major asset classes ahead of market-moving events. Our new suite of CME Group Volatility Indexes now make implied volatility information directly available to clients. Going forward, by applying the CVOL methodology to all of our futures benchmarks across asset classes, we will be able to deliver a precise and consistent measure of volatility to market participants, ranging from Fixed Income and FX to Energy, Metals and Agricultural markets.

The CVOL indexes evaluate the 30-day forward-looking implied volatility of an underlying futures contract formed on the information from the prices of CME Group’s options on futures markets. The methodology used in CVOL includes every strike price on the implied volatility curve, not only at-the-money options prices, in order to calculate a single volatility value called simple variance. This will allow clients to track and compare this metric across all available CVOL indexes.

CME Group

In the beginning, the daily indexes will include two years of historical data on the seven individual treasury and FX volatility indexes, as well as an aggregate G5 FX currency index:

  • 10-Year Treasury CVOL Index (price and yield volatility indexes)
  • G5 FX CVOL Index
  • EUR/USD CVOL Index
  • GBP/USD CVOL Index
  • JPY/USD CVOL Index
  • AUD/USD CVOL Index
  • CAD/USD CVOL Index

Additionally, clients can also access three extra indicators for each of the CVOL benchmark indexes to better understand market sentiment:

  • Up Variance – index on calls only
  • Down Variance – index on puts only
  • Skew – difference between Up Variance and Down Variance

CVOL is a collection of benchmarks, based on industry best practices and the IOSCO Principles for Financial Benchmarks. CME Group Volatility Indexes will be available through the CVOL Index Visualizer tool, powered by QuikStrike and through CME Datamine, with calculations made daily, updated at the end of every trading session.

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