BeVIXed: Trading Fear in the Volatility Complex

23 Pages Posted: 20 Oct 2022 Last revised: 28 Oct 2022

See all articles by Chakravarthy Varadarajan

Chakravarthy Varadarajan

University of Manchester - School of Physics and Astronomy

Klaus Reiner Schenk-Hoppé

University of Manchester - Department of Economics

Date Written: October 16, 2022

Abstract

We explain the evolution of the volatility market and present the infamous day of `Volmageddon' as an insightful case study. Our survey focuses on the pricing and trading of volatility-linked assets, highlighting the impact of mechanical hedging in markets for futures and higher-order derivatives. We supplement the vast statistical analysis of volatility derivatives with a financial economists’ perspective.

Keywords: Volatility, VIX, XIV, futures, crash

JEL Classification: G02

Suggested Citation

Varadarajan, Chakravarthy and Schenk-Hoppé, Klaus Reiner, BeVIXed: Trading Fear in the Volatility Complex (October 16, 2022). Available at SSRN: https://ssrn.com/abstract=4249320 or http://dx.doi.org/10.2139/ssrn.4249320

Chakravarthy Varadarajan

University of Manchester - School of Physics and Astronomy ( email )

United Kingdom

Klaus Reiner Schenk-Hoppé (Contact Author)

University of Manchester - Department of Economics ( email )

Arthur Lewis Building
Oxford Road
Manchester, M13 9PL
United Kingdom

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