CDXIG Index, VIX and the Swap Curve Slope: A Study in Cross-Market Statistical Arbitrage
affiliation not provided to SSRN
October 6, 2008
This article tries to track the CDXIG index 5y spreads by studying the effect of Equity Index Volatility (by employing VIX levels) and 5/10 US swap curve slope (calculated as the difference between the 10yr and 5yr swap rates) on the index spreads by employing an OLS regression within the premise of a partial adjustment model. After a through examination of the interplay of the chosen variables with the Index spreads, an identification of major VIX level/Swap curve slope regimes is made to help identify/quantify a long-short statistical arbitrage trading strategy.
Number of Pages in PDF File: 50
Keywords: Partial adjustment model, Statistical arbitrage
JEL Classification: C15, C22, C32, C51, C52, C53
Date posted: October 7, 2008
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