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Practical applications of The Bitcoin VIX and its variance risk premium
journal contribution
posted on 2023-06-10, 04:05 authored by Carol AlexanderCarol Alexander, Arben ImerajArben ImerajIn The Bitcoin VIX and Its Variance Risk Premium, published in the Spring 2021 issue of The Journal of Alternative Investments, Carol Alexander and Arben Imeraj (both of the University of Sussex) introduce the bitcoin volatility index. CryptoCompare now streams this index every 15 seconds, under the ticker BVIN. Alexander and Imeraj are the first to investigate the bitcoin variance risk premiums and the behavior of the term structure of fair-value variance swap rates. The authors collect price data on bitcoin derivatives traded on the Deribit exchange via its application programming interface. They construct a family of indexes for different maturities using the same methodology used by CBOE’s equity volatility index, the VIX. They describe the methodology, noting that it accounts for information in volatility skews but assumes no jumps in prices. They also compare the indexes with those created with an alternative technique that does not rely on the no-jump assumption. In addition, they explore the diversification potential of bitcoin variance through correlation matrixes with other assets’ volatility indexes, realized volatilities, and other variance risk premiums.
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Publication status
- Published
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- Published version
Journal
The Journal of Alternative InvestmentsISSN
1520-3255Publisher
Pageant Media USExternal DOI
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jai.2021.pa447-jai.2021.pa447Department affiliated with
- Accounting and Finance Publications
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- No
Peer reviewed?
- Yes
Legacy Posted Date
2022-06-28First Compliant Deposit (FCD) Date
2022-06-27Usage metrics
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