CME Group has launched realised volatility forex contracts, based on a rationale devised by the Volatility Exchange.

They are the first contracts offering direct trading of FX volatility, and the first that settle to realised rather than implied volatility. Investors can spread them against CME’s FX futures and options.

The EUR/USD One Month and Three Month Realised Volatility Futures are the first currency pairs to be launched. They are cash-settled to either a one or three month historical or realised volatility, calculated by reference to daily price movements in CME currency futures.

The realised volatility calculation is based on a simple standard deviation formula.

The contracts are valued at $1,000 x the computed realised volatility for the specific period. Fees are waived until the end of the year.