What Is an ‘Implied Volatility’ Oracle?
An implied volatility (IV) oracle provides a real-time, aggregated value for the expected future volatility of an asset, derived from the market prices of its options contracts. Unlike a standard price oracle, an IV oracle feeds a calculated metric into the blockchain.
This data is critical for decentralized options protocols to accurately price option premiums using models like Black-Scholes and for managing risk, as volatility is a key input.
Glossar
Decentralized Options Protocols
Protocol ⎊ Decentralized Options Protocols represent a paradigm shift in derivatives trading, leveraging blockchain technology to disintermediate traditional exchanges and clearinghouses.
Aggregated Value
Synthesis ⎊ Aggregated Value, within cryptocurrency and derivatives, represents a consolidated measure of underlying asset exposure, often derived from multiple sources or instruments.
Implied Volatility
Expectation ⎊ This value represents the market's consensus forecast of future asset price fluctuation, derived by reversing option pricing models using current market premiums.
Option Premiums
Valuation ⎊ Option premiums, within cryptocurrency derivatives, represent the price a buyer pays to a seller for the right, but not the obligation, to buy or sell an underlying asset at a specified price on or before a specific date.