VIX derivatives: Valuation models and empirical evidence
Journal
Pacific Basin Finance Journal
Journal Volume
53
Pages
1-21
Date Issued
2019
Author(s)
Abstract
This study proposes an efficient approach for the pricing of VIX derivatives under the affine framework and investigates the respective value of two variance components and variance jumps in the pricing of VIX derivatives. Our numerical results show that our approach significantly reduce the computational burden. Our empirical findings provide support for the use of two-variance component models as the means of capturing the fickle term structure of VIX derivatives, and the use of variance jumps is vital when included in the long-run variance component. ? 2018 Elsevier B.V.
Subjects
Affine model
Variance components
Variance jump
VIX derivatives
Type
journal article