Investment Strategies with VIX and VSTOXX Futures

44 Pages Posted: 8 Nov 2013 Last revised: 2 Dec 2013

See all articles by Silvia Stanescu

Silvia Stanescu

University of Kent - Kent Business School

Radu Tunaru

University of Kent - Kent Business School

Date Written: November 7, 2013

Abstract

This study examines historical data on S&P500 and EURO STOXX 50, VIX and VSTOXX, VIX and VSTOXX futures, to reveal linkages between these important series that can be used by equity investors to generate alpha and protect their investments during turbulent times. A comparative portfolio performance analysis in the U.S. and the E.U. zone reveals that over time the best investment strategy for a stock investor is to add both bonds and volatility futures to their portfolio. We also reveal a long-short cross border statistical arbitrage strategy pairing volatility index futures that can generate profits using forecasts produced by suitable GARCH models.

Keywords: volatility indexes, volatility derivatives, GARCH models, statistical arbitrage

JEL Classification: G15, G11, C58

Suggested Citation

Stanescu, Silvia and Tunaru, Radu, Investment Strategies with VIX and VSTOXX Futures (November 7, 2013). Available at SSRN: https://ssrn.com/abstract=2351427 or http://dx.doi.org/10.2139/ssrn.2351427

Silvia Stanescu (Contact Author)

University of Kent - Kent Business School ( email )

Canterbury, Kent CT2 7PE
United Kingdom

Radu Tunaru

University of Kent - Kent Business School ( email )

Canterbury Kent, CT2 7PE
United Kingdom

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