Modeling Market Volatility

Discussion in 'Trading' started by butitstheplaza, Jul 3, 2007.

  1. I'm starting a side project for my job, and would appreciate some advice!

    The idea is to compare my company's client trading volume (we're an online forex broker) with overall market volume/volatility patterns.. aka, if the market dries up in early summer then we should expect to see a dip in our numbers.

    My problem is finding the right market indices/stats to use for comparison. I'm thinking of using the VIX and credit spreads, but those dont exactly gauge the forex market specitically.

    Any ideas guys?
  2. (1) It's summer time. Your volume will taper off noticeably until Labor Day. (2) You could look at the volume on currency futures contracts at the CME and see if there is correlation between their volume trends and your company's. (3) You could use implied volatility information from options at the CME to look for correlation between volume and volatility.