An Analysis on the Intraday Trading Activity of VIX Derivatives

Journal of Futures Markets, Forthcoming

42 Pages Posted: 2 May 2017 Last revised: 9 Dec 2017

See all articles by Dian-Xuan Kao

Dian-Xuan Kao

National Taiwan University

Wei-Che Tsai

Oregon State University; National Sun Yat-sen University - Department of Finance

Yaw-Huei Wang

National Taiwan University; UNSW

Kuang-Chieh Yen

Soochow University, Taiwan

Date Written: April 1, 2017

Abstract

We investigate the relation between trading activity in the VIX derivative markets and changes in the VIX index under a high-frequency framework. We find a significant relation between the signed trading variables of VIX futures and the contemporaneous changes in the VIX index. In addition, the net signed trading variables of VIX futures are significant predictors of future changes in the VIX index. Our results provide support for the informational role of VIX futures and evidence that trading activity in VIX options is likely caused by temporary liquidity shocks rather than the likelihood of informed trading.

Keywords: VIX index; VIX futures; VIX options; Trading activity

JEL Classification: G12, G14

Suggested Citation

Kao, Dian-Xuan and Tsai, Wei-Che and Wang, Yaw-Huei and Yen, Kuang-Chieh, An Analysis on the Intraday Trading Activity of VIX Derivatives (April 1, 2017). Journal of Futures Markets, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2961158 or http://dx.doi.org/10.2139/ssrn.2961158

Dian-Xuan Kao

National Taiwan University ( email )

1 Sec. 4, Roosevelt Road
Taipei 106, 106
Taiwan

Wei-Che Tsai (Contact Author)

Oregon State University ( email )

Corvallis, OR 97331
United States

National Sun Yat-sen University - Department of Finance ( email )

No.70, Lianhai Rd., Gushan District,
Kaohsiung City
Taiwan

Yaw-Huei Wang

National Taiwan University ( email )

Department and Graduate Institute of Finance
College of Management
Taipei, 106
Taiwan
+886233661092 (Phone)
+886283695581 (Fax)

UNSW ( email )

Sydney, NSW 2052
Australia

Kuang-Chieh Yen

Soochow University, Taiwan ( email )

56. kuei-yang St., Sec. 1
Taipei, Taiwan 10048
Taiwan

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