Trading and Investing in Volatility Products
35 Pages Posted: 13 Oct 2015
Date Written: November 2015
Since the banking crisis the market for volatility exchange‐traded products has developed rapidly as it opens to clients beyond the large institutional investor pool. Speculation is driven by increasingly complex leveraged and inverse exposures including those that attempt to trade on significant roll costs in volatility futures curves. Longer‐term investors use these products for the purposes of equity diversification, driven by fears of an ongoing Eurozone crisis. We survey the burgeoning academic literature in this area and present a comprehensive and up‐to‐date comparison of the market and statistical characteristics of European and US exchange‐traded volatility products.
Keywords: VIX, VSTOXX, volatility futures, volatility ETPs, roll yield
JEL Classification: G12, G15, G23
Suggested Citation: Suggested Citation