VIX Futures

Posted: 29 Aug 2005

See all articles by Jin E. Zhang

Jin E. Zhang

University of Otago, Otago Business School, Department of Accountancy and Finance

Yingzi Zhu

Tsinghua University - School of Economics & Management

Abstract

VIX futures are exchange-traded contracts on a future volatility index level (VIX) derived from a basket of SPX stock index options. The paper posits a stochastic variance model of VIX time evolution, and develops an expression for VIX futures. Free parameters are estimated from market data over the past few years. It is found that the model with parameters estimated from the whole period from 1990 to 2005 overprices the futures contracts by 16-44%. But the discrepancy is dramatically reduced to 2-12% if the parameters are estimated from the most recent one-year period.

Keywords: VIX, VIX futures, square root process

JEL Classification: G13

Suggested Citation

Zhang, Jin E. and Zhu, Yingzi, VIX Futures. Journal of Futures Markets, Vol. 26, No. 6, pp. 521-531, Available at SSRN: https://ssrn.com/abstract=785624

Jin E. Zhang (Contact Author)

University of Otago, Otago Business School, Department of Accountancy and Finance ( email )

Dunedin, 9054
New Zealand
64 3 479 8575 (Phone)
64 3 479 8171 (Fax)

HOME PAGE: http://sites.google.com/site/jinzhanghomepage/home

Yingzi Zhu

Tsinghua University - School of Economics & Management ( email )

Beijing, 100084
China
+86-10-62786041 (Phone)

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