Download This PaperBeVIXed: Trading Fear in the Volatility Complex
23 Pages Posted: 20 Oct 2022 Last revised: 12 Jul 2023
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: 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
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