Good Vibrations: The Seismology Of Market Volatility

Seismologists are still searching for ways to successfully predict earthquakes. So far, they have only been able to introduce warning systems that provide alerts while an earthquake is already in progress. Shifts in financial markets adhere to different rules. Changes in volatility are often preceded by ‘rumblings’ or are caused by predictable events. Being able to ‘read’ the signs and predict market movements, also the smaller day-to-day movements can create opportunity for both the buy- and sell-side.

Volatility is key to both alpha generation and trading performance measurement and is a crucial input for trading algorithms and risk methodologies. The capacity to forecast size and direction of volatility is therefore enormously valuable for traders of any strategy.

The newest Deutsche Börse analytic, the ‘Intraday Volatility Forecast’, is designed to provide that capacity. It aims to forecast the volatility for the DAX, EURO STOXX 50 and Euro-Bund futures; Eurex’ most important products. The Volatility Forecast creates a forward-looking insight into the peaks and troughs of market movements and provides the user with a major informational advantage over other traders.