Access to Volatility Via Listed Futures
14 Pages Posted: 14 Oct 2010
Date Written: October 12, 2010
Volatility has emerged has an important asset class in the last decade. Often referred to as "the investor fear gauge," it can be a potentially useful diversification tool in a broad equity portfolio, especially under down markets. However, it is not possible to trade the spot VIX directly. With the launch of S&O 500 VIX Futures Index Series in January 2009, a variety of popular exchange traded products linked to these indices offer broad market access to volatility trading. In this paper, we elaborate on the portfolio hedge and distributional properties of VIX futures based indices versus those of spot VIX.
Keywords: S&P 500, VIX, S&P 500 options, S&P 500 VIX futures
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