The Cboe EuroCurrency Volatility Index (EVZ) tracks the near-term projected volatility of the euro/U.S. dollar exchange rate. It measures the market’s expectation of 30-day volatility of the EUR/USD exchange rate by applying the VIX methodology to options on the CurrencyShares Euro Trust (FXE).
Like VIX, EUVIX is calculated by interpolating between two weighted sums of option midquote values, in this case, options on EVZ.
The two sums essentially represent the expected variance of the Euro to Dollar exchange rate up to two option expiration dates that bracket a 30-day period of time.
EVZ is obtained by annualizing the interpolated value, taking its square root, and expressing the result in percentage points.
Like other VIX benchmarks, EVZ uses options spanning a wide range of strike prices.
As such, the performance of FXE is intended to reflect the USD/EUR exchange rate, minus fund expenses.
Here’s a chart example showing Cboe EuroCurrency Volatility Index.
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