May 13th, 2021 at 1:00 pm UTC · 3 min read
The Crypto Volatility Index project, an open-source decentralized finance protocol backed by COTI, is welcoming professor Dan Galai, the co-creator of the VIX, into its board of advisors. Prof. Galai will assist the CVI team in establishing the protocol as the market standard for a crypto analog of the VIX.
The CBOE Market Volatility Index, commonly known by its ticker VIX and often referred to as the “Fear Index”, is a financial instrument tracking the real-time implied volatility of 30-day S&P 500 options. It was initially designed by Dan Galai and Menachem Brenner in a series of papers published after 1989, where they envisioned the creation of a series of volatility indices for different asset classes, including stock markets but also interest rates and foreign exchange rates. The concept was later implemented by the Chicago Board Options Exchange in 1993.
Prof. Galai said,
“As advisor to the Crypto Volatility Index project, I’m looking forward to helping design advanced risk management tools for investors in this new, and often wild asset class. I am confident the CVI team has the knowledge and capability to put theory into practice and build a truly useful product in the cryptocurrency space.”
Prof. Galai has already reviewed the CVI whitepaper and offered valuable suggestions for its implementation.
Prof. Dan Galai is Professor Emeritus of Finance and Business Administration at the Hebrew University in Jerusalem. He is a world-renowned expert in risk management and financial derivatives, having obtained a PhD in Business Administration at the University of Chicago. In his long career, he served as consultant to the Chicago Board Options Exchange and American Stock Exchange. His academic career included Visiting Professor of Finance positions at INSEAD, HEC Lausanne, UCLA, UC Berkeley, and others.
The Crypto Volatility Index tracks the implied volatility in the next thirty days of major Bitcoin and Ether options markets. Implied volatility is a component of an option’s price representing the market’s expectation of future price movements for the underlying asset. Particularly high implied volatility suggests that the market believes a downturn is imminent, though the prediction does not always match reality.
The CVI, in addition to offering an invaluable indicator for assessing trading and investment strategies, can also be traded directly, offering an incredibly versatile tool for cryptocurrency traders. The volatility index can be used to hedge other crypto positions against downturns, or facilitate creative trading strategies based on market sentiment.
Crypto Volatility Index (CVI) is a revolutionary and first of its kind decentralized VIX for the crypto market. The CVI allows users to hedge themselves against market volatility and impermanent loss. CVI is a full-scale decentralized ecosystem that brings the sophisticated and very popular “market fear index” into the crypto market. It is created by computing a decentralized volatility index from cryptocurrency option prices, together with analyzing the market’s expectation of future volatility.
COTI is a fully encompassing “Finance on the blockchain” ecosystem, specifically designed to meet the challenges of both centralized finance (fees, latency, global inclusion and risk) and Decentralized Finance DeFi (fees, clogging and complexity) by introducing a new type of DAG based base protocol and infrastructure that is scalable, fast, private, inclusive, low cost and is optimized for finance.
COTI is developing CVI as an open-source decentralized product, governed by its users.