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Article: The new market for volatility trading

TitleThe new market for volatility trading
Authors
Issue Date2010
PublisherJohn Wiley & Sons, Inc. The Journal's web site is located at http://www.interscience.wiley.com/jpages/0270-7314/
Citation
Journal Of Futures Markets, 2010, v. 30 n. 9, p. 809-833 How to Cite?
AbstractThis study analyses the new market for trading volatility; VIX futures. We first use market data to establish the relationship between VIX futures prices and the index itself. We observe that VIX futures and VIX are highly correlated; the term structure of average VIX futures prices is upward sloping, whereas the term structure of VIX futures volatility is downward sloping. To establish a theoretical relationship between VIX futures and VIX, we model the instantaneous variance using a simple square root mean-reverting process with a stochastic long-term mean level. Using daily calibrated long-term mean and VIX, the model gives good predictions of VIX futures prices under normal market situation. These parameter estimates could be used to price VIX options. © 2010 Wiley Periodicals, Inc.
Persistent Identifierhttp://hdl.handle.net/10722/129429
ISSN
2015 Impact Factor: 0.698
2015 SCImago Journal Rankings: 0.520
ISI Accession Number ID
References

 

DC FieldValueLanguage
dc.contributor.authorZhang, JEen_HK
dc.contributor.authorShu, Jen_HK
dc.contributor.authorBrenner, Men_HK
dc.date.accessioned2010-12-23T08:37:11Z-
dc.date.available2010-12-23T08:37:11Z-
dc.date.issued2010en_HK
dc.identifier.citationJournal Of Futures Markets, 2010, v. 30 n. 9, p. 809-833en_HK
dc.identifier.issn0270-7314en_HK
dc.identifier.urihttp://hdl.handle.net/10722/129429-
dc.description.abstractThis study analyses the new market for trading volatility; VIX futures. We first use market data to establish the relationship between VIX futures prices and the index itself. We observe that VIX futures and VIX are highly correlated; the term structure of average VIX futures prices is upward sloping, whereas the term structure of VIX futures volatility is downward sloping. To establish a theoretical relationship between VIX futures and VIX, we model the instantaneous variance using a simple square root mean-reverting process with a stochastic long-term mean level. Using daily calibrated long-term mean and VIX, the model gives good predictions of VIX futures prices under normal market situation. These parameter estimates could be used to price VIX options. © 2010 Wiley Periodicals, Inc.en_HK
dc.languageengen_US
dc.publisherJohn Wiley & Sons, Inc. The Journal's web site is located at http://www.interscience.wiley.com/jpages/0270-7314/en_HK
dc.relation.ispartofJournal of Futures Marketsen_HK
dc.rightsThe Journal of Futures Markets. Copyright © John Wiley & Sons, Inc.-
dc.titleThe new market for volatility tradingen_HK
dc.typeArticleen_HK
dc.identifier.openurlhttp://library.hku.hk:4550/resserv?sid=HKU:IR&issn=0270-7314&volume=30&issue=9&spage=809&epage=833&date=2010&atitle=The+New+Market+for+Volatility+Trading-
dc.identifier.emailZhang, JE: jinzhang@hku.hken_HK
dc.identifier.authorityZhang, JE=rp01125en_HK
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1002/fut.20448en_HK
dc.identifier.scopuseid_2-s2.0-77956107698en_HK
dc.identifier.hkuros177298en_US
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-77956107698&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume30en_HK
dc.identifier.issue9en_HK
dc.identifier.spage809en_HK
dc.identifier.epage833en_HK
dc.identifier.eissn1096-9934-
dc.identifier.isiWOS:000279780300001-
dc.publisher.placeUnited Statesen_HK
dc.identifier.scopusauthoridZhang, JE=7601346659en_HK
dc.identifier.scopusauthoridShu, J=12243627100en_HK
dc.identifier.scopusauthoridBrenner, M=7402358415en_HK

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