VCRIX — A volatility index for crypto-currencies

Public interest, explosive returns, and diversification opportunities gave stimulus to the adoption of traditional financial tools crypto-currencies. While CRIX offered first scientifically-backed proxy crypto-market (analogous S&P 500), measuring forward-oriented risk in crypto-currency market posed a challenge different kind. Following intuition “fear index” VIX for American stock market, VCRIX volatility index was created capture investor expectations about ecosystem. is built based on offers forecast Heterogeneous Auto-Regressive (HAR) model. The HAR model selected as most suitable out horse race models, with two proxies implied volatility, namely 30 days mean annualized realized volatility. further examined by simulation (resulting correlation 78% between actual “VIX” version estimated technology). Trading strategies confirmed predictive power supported selection means proxy. best performing trading strategy use outperformed benchmark 99.8% tested period 164% additional returns. provides forecasting functionality serves investors’ absence developed crypto derivatives market. These features provide enhanced decision making capacities monitoring, strategies, potentially option pricing.