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Author Topic: Volatility Index  (Read 2264 times)
dree12
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July 28, 2012, 09:12:01 PM
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Just wanted to share this chart I made. The index is computed on the difference between above-average and below-average volatility dates on the 30-day period centered after the day the index is computed for.

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July 28, 2012, 09:33:29 PM
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So right now, according to your chart we areon the index value of about -5, in respect to the past 30-day period, which means the volatility has gone down by 5% compared to the latest 30-day-average??
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July 28, 2012, 09:41:23 PM
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So right now, according to your chart we areon the index value of about -5, in respect to the past 30-day period, which means the volatility has gone down by 5% compared to the latest 30-day-average??
The volatility index is measured in days, not percentages. I forgot to include the unit in the y-axis. It effectively measures how many days in the 30-day period have been above average in volatility and subtracts the number of days that have been below average in volatility.
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July 29, 2012, 02:30:27 AM
 #4

So right now, according to your chart we areon the index value of about -5, in respect to the past 30-day period, which means the volatility has gone down by 5% compared to the latest 30-day-average??
The volatility index is measured in days, not percentages. I forgot to include the unit in the y-axis. It effectively measures how many days in the 30-day period have been above average in volatility and subtracts the number of days that have been below average in volatility.

So, if it stays constant at a positive value (a horizontal line in your plot), the volatility is getting higher and higher?

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dree12
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July 29, 2012, 02:33:32 AM
 #5

So right now, according to your chart we areon the index value of about -5, in respect to the past 30-day period, which means the volatility has gone down by 5% compared to the latest 30-day-average??
The volatility index is measured in days, not percentages. I forgot to include the unit in the y-axis. It effectively measures how many days in the 30-day period have been above average in volatility and subtracts the number of days that have been below average in volatility.

So, if it stays constant at a positive value (a horizontal line in your plot), the volatility is getting higher and higher?
Horizontal lines are not very likely because of the way the plot is made, but they do represent no change in volatility. The value is irrelevant except as a relative measure of volatility: 0 is Bitcoin's average volatility, -30 is far below average volatility, and 30 is far above average volatility.
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July 29, 2012, 03:53:16 AM
 #6

So right now, according to your chart we areon the index value of about -5, in respect to the past 30-day period, which means the volatility has gone down by 5% compared to the latest 30-day-average??
The volatility index is measured in days, not percentages. I forgot to include the unit in the y-axis. It effectively measures how many days in the 30-day period have been above average in volatility and subtracts the number of days that have been below average in volatility.

So, if it stays constant at a positive value (a horizontal line in your plot), the volatility is getting higher and higher?
Horizontal lines are not very likely because of the way the plot is made, but they do represent no change in volatility. The value is irrelevant except as a relative measure of volatility: 0 is Bitcoin's average volatility, -30 is far below average volatility, and 30 is far above average volatility.
Is this correct: if the index is 6, there have been 18 days with above-average volatility in the past 30 days? Now, if we keep moving the 30-day window, and the index remains constant at 6, this means that the average volatility keeps increasing (since index remains positive), correct? Just making sure I am interpretting the graph correctly. Horizontal line would represent the constant index, not the constant volatility?

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dree12
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July 29, 2012, 03:54:43 AM
 #7

So right now, according to your chart we areon the index value of about -5, in respect to the past 30-day period, which means the volatility has gone down by 5% compared to the latest 30-day-average??
The volatility index is measured in days, not percentages. I forgot to include the unit in the y-axis. It effectively measures how many days in the 30-day period have been above average in volatility and subtracts the number of days that have been below average in volatility.

So, if it stays constant at a positive value (a horizontal line in your plot), the volatility is getting higher and higher?
Horizontal lines are not very likely because of the way the plot is made, but they do represent no change in volatility. The value is irrelevant except as a relative measure of volatility: 0 is Bitcoin's average volatility, -30 is far below average volatility, and 30 is far above average volatility.
Is this correct: if the index is 6, there have been 18 days with above-average volatility in the past 30 days? Now, if we keep moving the 30-day window, and the index remains constant at 6, this means that the average volatility keeps increasing (since index remains positive), correct? Just making sure I am interpretting the graph correctly. Horizontal line would represent the constant index, not the constant volatility?
The average volatility does not change. It is computed from two years of Bitcoin Mt. Gox USD data.
S3052
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July 29, 2012, 06:58:08 AM
 #8

I posted a chart showing real historical bitcoin volatility here:

https://bitcointalk.org/index.php?topic=1493.2420

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July 29, 2012, 08:15:37 PM
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The average volatility does not change. It is computed from two years of Bitcoin Mt. Gox USD data.
Is volatility calculated as an absolute number, or as a percentage of the current average price?  If it's an absolute number like $0.75, then as the price rises the calculated volatility will go down. Which looks like what's happening in your graph, but perhaps that's an artifact.  If it's not already, it should be normalized by using a %, which might be why s3052's chart is different from yours.

Also, just out of curiosity, what is the 2-year average volatility?
dree12
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July 29, 2012, 08:59:54 PM
 #10

The average volatility does not change. It is computed from two years of Bitcoin Mt. Gox USD data.
Is volatility calculated as an absolute number, or as a percentage of the current average price?  If it's an absolute number like $0.75, then as the price rises the calculated volatility will go down. Which looks like what's happening in your graph, but perhaps that's an artifact.  If it's not already, it should be normalized by using a %, which might be why s3052's chart is different from yours.

Also, just out of curiosity, what is the 2-year average volatility?

The volatility is measured by:

Code:
abs(log(day2/day1))

This normalized based not only on %, but also on direction.

The average volatility is 0.0038-0.0167. This covers the 34% of data points that are considered "average".
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