Abstract
The CBOE Volatility Index? (VIX?), the popular gauge of S&P 500? implied volatility, can now be traded through exchange-listed futures and options. In this article, we demonstrate the use of VIX as a portfolio hedge, show how portfolio efficiency may be improved by a small exposure to VIX, and discuss implementation of such strategies through VIX futures and options. Specifically, we explore the pricing of VIX contracts and explain how they reflect the forward value of VIX rather than the current value. We test the behavior of the new contracts at periods of market volatility to see if the desirable qualities of VIX carry over when using VIX-linked futures and options. <b>TOPICS:</b>Futures and forward contracts, options, portfolio construction
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
