A General Framework for a Joint Calibration of VIX and VXX Options
26 Pages Posted: 19 Feb 2021
Date Written: December 15, 2020
We analyze the VIX futures market with a focus on the exchange-traded notes written on such contracts, in particular, we investigate the VXX notes tracking the short-end part of the futures term structure. Inspired by recent developments in commodity smile modeling, we present a multi-factor stochastic local-volatility model able to jointly calibrate plain vanilla options both on VIX futures and VXX notes. We discuss numerical results on real market data by highlighting the impact of model parameters on implied volatilities.
Keywords: Local volatility, Stochastic volatility, VIX, VIX futures, VXX.
JEL Classification: C63, G13
Suggested Citation: Suggested Citation