CAPIVIX Index Methodology

This article provides comprehensive information on the calculation methodology for our CAPIVIX (CoinAPI Volatility Index) indexes. These indexes measure the market's expectation of 30-day volatility for major cryptocurrencies, similar to the VIX methodology for traditional markets. Currently, we calculate CAPIVIX for BTC/USD and ETH/USD pairs.

Data Inputs

Exchange Selection

The index considers options data from various selected derivatives exchanges.

Instrument Selection

For each underlying asset (BTC, ETH):

• Near-term and next-term put and call options
• Only options with more than zero volume in the last 24 hours
• Strike prices that straddle the current spot price
• Minimum of 8 strike prices per expiration

Time Periods

The calculation uses two expiration time periods:

1. Near-term: Options with < 30 days to expiration
2. Next-term: Options with ≥ 30 days to expiration

Calculation Methodology

1. Data Collection:

   • Select eligible options for both near-term and next-term expirations
   • Collect bid-ask quotes for each selected option
   • Record the risk-free interest rate for each expiration period

2. Forward Level Calculation:

   • Determine the forward index level (F) using put-call parity
   • Identify the strike price (K₀) at which the absolute difference between call and put prices is smallest

3. Variance Calculation for each expiration:

   σ² = (2/T) * Σ[ΔK/K² * e^(RT) * Q(K)]

   Where:

   • T is time to expiration
   • ΔK is the interval between strike prices
   • R is the risk-free interest rate
   • Q(K) is the midpoint of the bid-ask spread for each option

4. 30-day Volatility Interpolation:

   CAPIVIX = 100 * √[{T₁σ₁²(N₂-N₃₀)/(N₂-N₁) + T₂σ₂²(N₃₀-N₁)/(N₂-N₁)} * N₃₆₅/N₃₀]

   Where:

   • N₁ and N₂ are near and next-term days to expiration
   • N₃₀ is 30 days
   • N₃₆₅ is 365 days

Index Outputs

Index Codes

Index values are created with the following format: IDX_VOL_CAPIVIX_{AssetId}_USD

For example:

• IDX_VOL_CAPIVIX_BTC_USD: Bitcoin Volatility Index
• IDX_VOL_CAPIVIX_ETH_USD: Ethereum Volatility Index

Frequency

The index is calculated every 100 milliseconds, providing near-real-time volatility expectations.

For real-time index updates, we recommend using our WebSocket Index API. This API provides continuous, low-latency updates, ensuring you receive the most up-to-date index values as they are calculated. For more information on how to connect and use the WebSocket API, please refer to our WebSocket Index API documentation.