There is no single measure of implied volatility for FX markets, unlike those that exist for the S&P500 or for US interest rates. To fill the gap, banks build their own proprietary indices, such as the JPMorgan global FX volatility index and Deutsche Bank’s Currency Volatility Index (CVix), using option pricing to measure implied volatility for certain currencies.
“There is value in this for various reasons, including understanding the probabilities behind the degree of price volatility expected in certain currencies, which may be useful for those needing to hedge,” says Joe Tuckey, head of FX analysis at Argentex, a London-listed currency broker.
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