Volatility Of Volatility
Quick Reference
| Property | Value |
|---|---|
| Dimension | regime |
| Category | volatility |
| Version | v0.9.0 (Beta) |
| Output Column | vol_of_vol |
Volatility of volatility: rolling_std(realized_vol, window) - instability in the volatility process itself
Formula
rolling_std(realized_vol, window)
CDM Inputs
| Column | CDM Table | Description |
|---|---|---|
realized_vol | cdm_* | CDM source table |
Parameters
| Parameter | Type | Default | Description |
|---|---|---|---|
window | integer [2, 10000] | 20 | Window size for volatility-of-volatility calculation |
Output
Column: vol_of_vol
Rolling standard deviation of realized volatility
Market Intuition & Trading Rationale
Vol-of-vol measures the stability of volatility: rolling_std(realized_vol, window). High vol-of-vol means volatility itself is fluctuating wildly 鈥?the market is switching between calm and turbulent regimes. Low vol-of-vol means volatility is stable 鈥?the current regime is persistent. Vol-of-vol often spikes before volatility itself changes, making it a leading indicator for regime transitions.
Usage Cases
- Volatility forecasting confidence: Low vol-of-vol 鈫?vol forecasts are reliable (stable regime). High vol-of-vol 鈫?vol forecasts are unreliable (regime is shifting). Scale position sizes based on forecast confidence.
- Regime transition early warning: Rising vol-of-vol while vol is stable 鈫?the vol regime is about to break. Prepare for a volatility event.
- regime context: Used in
realized_volatility_spectrumpack 鈥?vol-of-vol distinguishes stable vol regimes (where term structure is informative) from unstable ones (where term structure is noise).
YAML Definition
name: volatility_of_volatility
description: 'Volatility of volatility: rolling_std(realized_vol, window) - instability
in the volatility process itself'
category: volatility
version: v0.9.0 (Beta)
dimension: regime
status: Pre-release
required_inputs:
- realized_vol
output_column: vol_of_vol
output_description: Rolling standard deviation of realized volatility
parameters:
window:
type: integer
description: Window size for volatility-of-volatility calculation
required: false
default: 20
constraints:
min: 2
max: 10000
formula: rolling_std(realized_vol, window)