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Article: Variance term structure and VIX futures pricing

TitleVariance term structure and VIX futures pricing
Authors
KeywordsArbitrage-free model
Stochastic volatility
Variance term structure
VIX futures
Volatility derivatives
Issue Date2007
PublisherWorld Scientific Publishing Co Pte Ltd. The Journal's web site is located at http://www.worldscinet.com/ijtaf/ijtaf.shtml
Citation
International Journal Of Theoretical And Applied Finance, 2007, v. 10 n. 1, p. 111-127 How to Cite?
AbstractUsing no arbitrage principle, we derive a relation between the drift term of risk-neutral dynamics for instantaneous variance and the term structure of forward variance. We show that the forward variance curve can be derived from options market. Based on the variance term structure, we derive a no arbitrage pricing model for VIX futures pricing. The model is the first no arbitrage model combining options market and VIX futures market. The model can be easily generalized to price other volatility derivatives. © World Scientific Publishing Company.
Persistent Identifierhttp://hdl.handle.net/10722/85591
ISSN
2015 SCImago Journal Rankings: 0.628
References

 

DC FieldValueLanguage
dc.contributor.authorZhu, Yen_HK
dc.contributor.authorZhang, JEen_HK
dc.date.accessioned2010-09-06T09:06:56Z-
dc.date.available2010-09-06T09:06:56Z-
dc.date.issued2007en_HK
dc.identifier.citationInternational Journal Of Theoretical And Applied Finance, 2007, v. 10 n. 1, p. 111-127en_HK
dc.identifier.issn0219-0249en_HK
dc.identifier.urihttp://hdl.handle.net/10722/85591-
dc.description.abstractUsing no arbitrage principle, we derive a relation between the drift term of risk-neutral dynamics for instantaneous variance and the term structure of forward variance. We show that the forward variance curve can be derived from options market. Based on the variance term structure, we derive a no arbitrage pricing model for VIX futures pricing. The model is the first no arbitrage model combining options market and VIX futures market. The model can be easily generalized to price other volatility derivatives. © World Scientific Publishing Company.en_HK
dc.languageengen_HK
dc.publisherWorld Scientific Publishing Co Pte Ltd. The Journal's web site is located at http://www.worldscinet.com/ijtaf/ijtaf.shtmlen_HK
dc.relation.ispartofInternational Journal of Theoretical and Applied Financeen_HK
dc.subjectArbitrage-free modelen_HK
dc.subjectStochastic volatilityen_HK
dc.subjectVariance term structureen_HK
dc.subjectVIX futuresen_HK
dc.subjectVolatility derivativesen_HK
dc.titleVariance term structure and VIX futures pricingen_HK
dc.typeArticleen_HK
dc.identifier.openurlhttp://library.hku.hk:4550/resserv?sid=HKU:IR&issn=0219-0249&volume=10&issue=1&spage=111&epage=127&date=2007&atitle=Variance+Term+Structure+and+VIX+Futures+Pricingen_HK
dc.identifier.emailZhang, JE: jinzhang@hku.hken_HK
dc.identifier.authorityZhang, JE=rp01125en_HK
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1142/S0219024907004123en_HK
dc.identifier.scopuseid_2-s2.0-33846440506en_HK
dc.identifier.hkuros125755en_HK
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-33846440506&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume10en_HK
dc.identifier.issue1en_HK
dc.identifier.spage111en_HK
dc.identifier.epage127en_HK
dc.publisher.placeSingaporeen_HK
dc.identifier.scopusauthoridZhu, Y=15830463500en_HK
dc.identifier.scopusauthoridZhang, JE=7601346659en_HK

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