- What are the CME Group Volatility (CVOL) Indexes?
- How do the CVOL Indexes work?
- What is the calculation methodology for CVOL Indexes?
- What is simple variance?
- What are the additional indicators that are calculated?
- What is UpVar?
- What is DnVar?
- What is Skew?
- What is ATM?
- What is Convexity?
- What are differences between the live streaming and end-of-day benchmark versions of CVOL?
- Which CME Group products will have their own CVOL Index and indicators?
- What products are used to calculate the broad-based aggregate end-of-day benchmark and live streaming CVOL Indexes?
- What time of day are end-of-day CVOL benchmarks available?
- What time of day will the live streaming CVOL Indexes be available?
- Are CVOL Indexes IOSCO-compliant benchmarks?
- Are the CVOL Indexes available for use under Benchmark Regulation (BMR)?
- What kind of oversight applies to CVOL Indexes?
- Where can I find additional information about CVOL Indexes?
- How can I access the Index data?
- Where can I find technical details surrounding the CVOL calculation methodology?
- Will CVOL Indexes be available for licensing?
- Can I receive this data through a third party like Bloomberg and Refinitiv or do I need to get it from CME Group directly?
- Can I access historical data for the three Eurodollar CVOL indices following their cessation of publication?
1. What are the CME Group Volatility (CVOL) Indexes?
Derived from the world’s most actively traded options on futures contracts across major asset classes, the CME Group Volatility Index (CVOL) delivers the first-ever cross-asset class family of implied volatility indexes based on simple variance. Using our proprietary simple variance methodology that assigns equal weighting to strikes across the entire implied volatility curve, the CVOL Index produces a more representative measure of the market’s expectation of 30-day forward risk.
CVOL is currently available in both live streaming and end-of-day versions on benchmark products spanning five asset classes across financial and commodity markets:
- Interest rates
- SOFR (90 day)
- SOFR 1Y Mid-Curve (90-day)
- SOFR 2Y Mid-Curve (90-day)
- US Treasuries
- 2-Year Treasury Note
- 5-Year Treasury Note
- 10-Year Treasury Note
- 30-Year Treasury Bond
- Aggregate Treasury Volatility Index
- Aggregate G5 FX Volatility Index
- Soybean Oil
- Soybean Meal
- Lean Hogs (60-day)
- Live Cattle (60-day)
- Class III Milk (60-day)
- Aggregate Agriculture Volatility Index
- WTI Crude Oil
- Henry Hub Natural Gas
- RBOB Gasoline
- NY Harbor ULSD
- Aggregate Energy Volatility Index
- Aggregate Metals Volatility Index
- Cross Asset Class
- Aggregate Commodities Volatility Index
*Only available in end-of-day benchmark
We publish the following CVOL Indexes and indicators on each supported product for both the end-of-day benchmark and the live streaming Index:
- CVOL Index
- Up Variance (“UpVar”)
- Down Variance (“DnVar”)
- At-The-Money (ATM)
2. How do the CVOL Indexes work?
CVOL Indexes measure the expected risk or implied volatility of an underlying future based on the information contained in the prices of options on that underlying future. In general, the expectation has a 30-day forward-looking horizon. The metric is an annualized standard deviation as used in typical option pricing models. The index family also includes metrics predicated on just out-of-the-money (OTM) calls and out-of-the-money OTM puts, ‘UpVar’ and ‘DnVar’, which are holistically consistent with the metric generated by using both the calls and the puts together. These related indexes provide insight into the direction that the collective marketplace is expecting greater risk.
3. What is the calculation methodology for CVOL Indexes?
CVOL Indexes use the option prices from one or two tenors (expirations) of options in order to generate a time-weighted average that centers on 30 days.
Each of the two tenors has its own variance metric which uses the actual option prices to estimate the area under the curve of expected market outcomes for that tenor. Each option price is multiplied by the average distance to the two adjacent strikes to create an area under the outcome curve. The lower the option price (with the same width to the nearest strikes), the less probability of the underlying futures contract’s price ending up in that price range if the slice or section’s area is divided by the sum of all the areas across the range of possible outcomes. The sum of all of these areas is therefore meant to represent the expected variance of the underlying futures contract’s price. By annualizing and taking the square root of the variance measurement, a standard, normal volatility number, as generally understood in the marketplace parlance, is produced.
By time-weighting the variances to a target of 30 days (prior to taking the square root) a 30-day expected variance is generated. That 30-day variance is then annualized and square-rooted to produce a 30-day forward-looking volatility estimate for the underlying future.
4. What is simple variance?
Simple variance, also known as Gaussian variance, is the square of the standard deviation of a normally distributed population. Simple variance allows for the underlying asset or futures prices to be negative, such as interest rates, or even commodities, such as oil.
This characteristic of simple variance distinguishes itself from log variance. Log variance, or the assumption that the underlying asset or future will exhibit a log normal distribution, does not allow for prices below zero. In fact, log variance swaps, which have been the most commonly employed variance swaps in the marketplace for several decades, will have an infinite value if an asset actual priced at zero. Other volatility indexes that use all the option prices from a specific tenor often attempt to build a replicating portfolio of that potentially infinite payoff. This renders those log variance metrics as being not very “simple.”
CVOL Indexes are generated using simple, or Gaussian, variance as the base to provide a consistent and tractable metric that can be compared across different individual products for a given asset class, and additionally across asset classes themselves.
5. What are the additional indicators that are calculated?
In addition to the primary implied volatility, CVOL Index, there are five other accompanying indicators which will price specific properties of the underlying asset’s expected future risk, as reflected by its options prices.
The five additional indicators are: ‘UpVariance’ or ‘UpVar;’ ‘DownVariance’ or ‘DnVar;’ Skew; ‘at-the-money’ or ‘ATM’; and ‘Convexity’.
6. What is UpVar?
Up Variance, or UpVar, is a metric that employs the same method for estimating the standard deviation as simple variance, but specifically uses only OTM calls in the calculation. The variance estimate is then doubled or mirrored in order to provide an apples-to-apples analogue to the two-sided set of options used in the regular index calculation.
7. What is DnVar?
Down Variance, or DnVar, like Up Variance, employs the same method for estimating the standard deviation as simple variance, but uses only OTM puts in the calculation. Similarly, the variance estimate is then doubled or mirrored in order to provide an apples-to-apples analogue to the two-sided set of options used in the regular calculation.
8. What is Skew?
Skew compares the Up Variance and Down Variance numbers to provide insight into how much implied volatility is priced into Calls compared to Puts. Two Skew numbers are provided, one showing the difference between the two (UpVar – DnVar), such that negative values indicate that the implied volatility is collectively higher for puts than for calls. The other Skew metric is the ratio of the two calculated by dividing the UpVar by the DnVar. In this case, if the puts had collectively higher implied volatility, the resulting measurement would be less than 1.0.
For Treasury products, there are two numeraires, price and yield. Since yields move inversely with the price of bonds, the yield version of UpVar is actually calculated using the puts that inform the DnVar for the price version. And the yield DnVar is similarly drawn from the calls that inform the price UpVar.
9. What is ATM?
The ‘at-the-money’ (ATM) indicator is the implied volatility of an option that has a strike exactly equal to the futures price. If the futures price happens to be exactly equal to an existing strike that is used in the CVOL calculation, that price is transformed into an implied volatility number using a closed-form formula. (Brenner-Subramaniam). If the futures price is between existing strikes, a synthetic ATM price is generated for that price using the closest existing option price and an assumption of 50 delta multiplied by the difference between that closest strike and the futures price. This synthetic price will undergo that same transformation using the same closed-form formula as above.
10. What is Convexity?
The convexity indictor is the ratio of the CVOL metric to the ‘at-the-money’ (ATM) indicator. This metric will be above one when the overall measurement drawn from all the strikes is higher than the ATM implied volatility and less than one if the overall CVOL metric is less than the ATM implied volatility. It is intended to provide a measure of the volatility “smile” that results from OTM options having individual implied volatilities that are successively greater.
11. What are differences between the live streaming and end-of-day benchmark versions of CVOL?
The live streaming CVOL Indexes calculate every 15 seconds from real-time option and futures markets during trading sessions. The end-of-day CVOL benchmark is calculated once per day, after regular trading session closes, and uses option and future settlement prices.
The calculation methodology using simple variance is otherwise the same for both versions, with the exception of how the farthest out-of-the-money options are incorporated into the calculation. The live streaming algorithm also has logic to manage momentary quoting deviations that may occur.
12. Which CME Group products will have their own CVOL Index and indicators?
We calculate and publish CVOL Indexes and indicators on 29 products across five asset classes, in addition to six broad-based market indexes on FX, Interest Rates, Energy, Metals, Agriculture, and cross-asset commodities.
Note: Coverage may differ somewhat between end-of-day benchmarks and live streaming versions. For a detailed listing, please refer to CVOL Indexes.
13. What products are used to calculate the broad-based aggregate end-of-day benchmark and live streaming CVOL Indexes?
Broad-based CVOL Indexes are calculated by taking the component CVOL Indexes and weighting them by each products’ respective dollar vega open interest for all options of that product. This weighting system reflects each product’s overall risk profile in the market in a normalized dollar amount. The weighted values are then summed to arrive at the broad-based index value.
- Treasury CVOL Index: An aggregate volatility index constructed based on 2-Year, 5-Year, 10-Year, and 30-year CVOL Indexes
- G5 FX CVOL Index: An aggregate volatility index constructed based on EUR, GBP, JPY, AUD, and CAD CVOL Indexes
- Agriculture CVOL Index: An aggregate volatility index constructed based on Corn, Soybeans, Wheat, Soybean Oil, Soybean Meal, Lean Hogs, Live Cattle, and Class III Milk CVOL Indexes.
- Energy CVOL Index: An aggregate volatility index constructed based on WTI Crude Oil, Henry Hub Natural Gas, RBOB Gasoline, and NY Harbor ULSD CVOL Indexes
- Metals CVOL Index: An aggregate volatility index constructed based on Gold, Silver, and Copper CVOL Indexes
- Commodities CVOL Index: An aggregate volatility index constructed based on WTI Crude Oil, Henry Hub Natural Gas, RBOB Gasoline, NY Harbor ULSD, Corn, Soybeans, Wheat, Lean Hogs, Live Cattle, Class III Milk, Gold, Silver, and Copper CVOL Indexes
14. What time of day are end-of-day CVOL benchmarks available?
Each official daily index fixing and each indicator fixing will be published same-day, after preliminary settlement prices and files have been published.
15. What time of day will the live streaming CVOL Indexes be available?
The live streaming CVOL Indexes publish every seconds with start and stop times that vary depending on product:
Single Product Live Streaming CVOL Indices
|DC||DCVL||Ags||10:00 AM ET||2:00 PM ET|
|OZW||WVL||Ags||3:00 AM ET||2:15 PM ET|
|OZS||SVL||Ags||9:30 AM ET||2:15 PM ET|
|LE||LEVL||Ags||9:30 AM ET||2:00 PM ET|
|OZM||SMVL||Ags||9:30 AM ET||2:15 PM ET|
|OZL||SOVL||Ags||9:30 AM ET||2:15 PM ET|
|OZC||CVL||Ags||2:00 AM ET||2:15 PM ET|
|HE||HEVL||Ags||9:30 AM ET||2:00 PM ET|
|TU||TUVL||Interest Rate||8:00 AM ET||4:45 PM ET|
|FV||FVVL||Interest Rate||8:00 AM ET||4:45 PM ET|
|TY||TYVL||Interest Rate||2:00 AM ET||4:45 PM ET|
|US||USVL||Interest Rate||8:00 AM ET||4:45 PM ET|
|S0||S1VL||Interest Rate||8:00 AM ET||4:45 PM ET|
|S2||S2VL||Interest Rate||8:00 AM ET||4:45 PM ET|
|SR3||SRVL||Interest Rate||8:00 AM ET||4:45 PM ET|
|ADU||ADVL||FX||3:30 AM ET||4:00 PM ET|
|CAU||CAVL||FX||3:30 AM ET||4:00 PM ET|
|EUU||EUVL||FX||3:30 AM ET||4:00 PM ET|
|GBU||GBVL||FX||3:30 AM ET||4:00 PM ET|
|JPU||JPVL||FX||3:30 AM ET||4:00 PM ET|
|OG||GCVL||Metals||2:00 AM ET||4:45 PM ET|
|SO||SIVL||Metals||4:00 AM ET||4:45 PM ET|
|HXE||HGVL||Metals||6:00 AM ET||4:45 PM ET|
|LO||CLVL||Energy||2:00 AM ET||4:45 PM ET|
|LN||NGVL||Energy||9:00 AM ET||4:45 PM ET|
|OB||RBVL||Energy||10:00 AM ET||4:45 PM ET|
|OH||HOVL||Energy||10:00 AM ET||4:45 PM ET|
Broad Based Live Streaming CVOL Indices
|AVL||AVL||Ags||10:00 AM ET||2:00 PM ET|
|TVL||TVL||Interest Rate||8:00 AM ET||4:45 PM ET|
|TPVL||TPVL||Interest Rate||8:00 AM ET||4:45 PM ET|
|FXVL||FXVL||FX (G5)||3:30 AM ET||4:00 PM ET|
|MVL||MVL||Metals||6:00 AM ET||4:45 PM ET|
|EVL||EVL||Energy||10:00 AM ET||4:45 PM ET|
|CMVL||CMVL||Commodity||10:00 AM ET||4:45 PM ET|
16. Are CVOL Indexes IOSCO-compliant benchmarks?
The End of Day CVOL Indexes and Live Streaming CVOL Indexes have been designed to meet industry best practices and the IOSCO Principles for Financial Benchmarks. A statement of IOSCO compliance is available on the CBA webpages.
17. Are the CVOL Indexes available for use under Benchmark Regulation (BMR)?
The end-of-day CVOL Indexes are a family of benchmarks registered under BMR and are available for use globally. All UK BMR regulated benchmarks are eligible for use in the EU as Third Country transitional benchmarks. A Benchmark Regulatory Statement is available on the CBA webpages.
18. What kind of oversight applies to CVOL Indexes?
CVOL Indexes are administered by CME Group Benchmark Administration Limited (CBA). In line with the IOSCO Principles for Financial Benchmarks, CBA has appointed an Oversight Committee, to review the integrity of the benchmark and challenge the administrator in all aspects of the benchmark determination process. CVOL Indexes will be subject to a regular audit process
19. Where can I find additional information about CVOL Indexes?
We have several resources you can access to learn more about the CVOL Indexes, all of which are available on the CVOL Index homepage.
20. How can I access the Index data?
The latest index values and indicators are displayed on our CVOL Index Visualizer tool. Note, the tool is meant for view-only referential consumption and not for commercial purposes.
Registered users can also download CVOL End-of-Day historical data for each index through CME DataMine.
Live streaming versions will be available to license soon through CME Group’s Market Data Platform, the Google Cloud Platform, and through authorized data vendors.
21. Where can I find technical details surrounding the CVOL calculation methodology?
22. Will CVOL Indexes be available for licensing?
While licensing is not available today, CME will offer a variety of direct licensing options including redistribution, historical usage, derived usage, and other common customer data licensing needs. Further, CVOL Indexes will be available to license through certain authorized data vendors. Please contact CME Data Sales to discuss your specific licensing needs.
23. Can I receive this data through a third party like Bloomberg and Refinitiv or do I need to get it from CME Group directly?
CME Group is working with redistributors to make this data available in vendor platforms and other data services. Ultimately, many third parties prioritize new data products based upon their direct customer demand. Please contact your data vendor to request CVOL as part of your data services.
24. Can I access historical data for the three Eurodollar CVOL indices following their cessation of publication?
Due to the acceleration of transition from Eurodollar futures and options to SOFR, CME Group Benchmark Administration (CBA), will be bringing forward the permanent cessation of the three Eurodollar CVOL indices to Friday, February 10.
However, the following indices still have historical data available via CME DataMine.
- Interest rates
- Eurodollar (90-day)
- Eurodollar 1Y Mid-Curve (90-day)
- Eurodollar 2Y Mid-Curve (90-day)
CME Group Volatility Index (CVOL™)
The global volatility benchmark index, derived from the world’s most actively traded options on futures, across major asset classes. Available in real-time streaming and daily benchmarks.
All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.