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Author : Elena Andreou
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (139 download)
Download or read book Predicting the VIX and the Volatility Risk Premium written by Elena Andreou and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Elena Andreou
Publisher :
ISBN 13 :
Total Pages : 50 pages
Book Rating : 4.:/5 (898 download)
Download or read book Predicting the VIX and Volatility Risk Premium written by Elena Andreou and published by . This book was released on 2014 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents an innovative approach to extracting factors which are shown to predict the VIX, the S&P 500 Realized Volatility and the Variance Risk Premium. The approach is innovative along two different dimensions, namely: (1) we extract factors from panels of filtered volatilities -- in particular large panels of univariate financial asset ARCH-type models and (2) we price equity volatility risk using factors which go beyond the equity class. These are volatility factors extracted from panels of volatilities of short-term funding and long-run corporate spreads as well as volatilities of energy and metals commodities returns and sport/future spreads.
Author : Jared Woodard
Publisher : Pearson Education
ISBN 13 : 0132756129
Total Pages : 49 pages
Book Rating : 4.1/5 (327 download)
Download or read book Options and the Volatility Risk Premium written by Jared Woodard and published by Pearson Education. This book was released on 2011-02-17 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: Master the new edge in options trades: the hidden volatility risk premium that exists in options for every major asset class. One of the most exciting areas of recent financial research has been the study of how the volatility implied by option prices relates to the volatility exhibited by their underlying assets. Here, I’ll explain the concept of the volatility risk premium, present evidence for its presence in options on every major asset class, and show how to estimate, predict, and trade on it....
Author : Ser-Huang Poon
Publisher : John Wiley & Sons
ISBN 13 : 0470856157
Total Pages : 236 pages
Book Rating : 4.4/5 (78 download)
Download or read book A Practical Guide to Forecasting Financial Market Volatility written by Ser-Huang Poon and published by John Wiley & Sons. This book was released on 2005-08-19 with total page 236 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial market volatility forecasting is one of today's most important areas of expertise for professionals and academics in investment, option pricing, and financial market regulation. While many books address financial market modelling, no single book is devoted primarily to the exploration of volatility forecasting and the practical use of forecasting models. A Practical Guide to Forecasting Financial Market Volatility provides practical guidance on this vital topic through an in-depth examination of a range of popular forecasting models. Details are provided on proven techniques for building volatility models, with guide-lines for actually using them in forecasting applications.
Author : Marcel Prokopczuk
Publisher :
ISBN 13 :
Total Pages : 50 pages
Book Rating : 4.:/5 (13 download)
Download or read book The Importance of the Volatility Risk Premium for Volatility Forecasting written by Marcel Prokopczuk and published by . This book was released on 2014 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we study the role of the volatility risk premium for the forecasting performance of implied volatility. We introduce a non-parametric and parsimonious approach to adjust the model-free implied volatility for the volatility risk premium and implement this methodology using more than 20 years of options and futures data on three major energy markets. Using regression models and statistical loss functions, we find compelling evidence to suggest that the risk premium adjusted implied volatility significantly outperforms other models, including its unadjusted counterpart. Our main finding holds for different choices of volatility estimators and competing time-series models, underlying the robustness of our results.
Author : Marcus Nossman
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (129 download)
Download or read book Is the VIX Futures Market Able to Predict the VIX Index? A Test of the Expectation Hypothesis written by Marcus Nossman and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper tests the expectation hypothesis by using the volatility index VIX and the futures written on that index. Because the VIX index is negatively correlated with the Samp;P 500 index returns, the VIX futures price should contain a negative risk premium, which we do confirm in this study. When the futures price is not adjusted with the risk premium, the expectation hypothesis is rejected at the 5 percent significance level for 20 of 21 forecast horizons. However when we adjust the futures price with the risk premium, obtained from a stochastic volatility model, the expectation hypothesis cannot be rejected. Further, we find that the risk premium adjusted futures price forecasts the direction of the VIX index well. The one day ahead forecast predicts the direction correctly in 73 percent of the times.
Author : Juliusz Jablecki
Publisher :
ISBN 13 :
Total Pages : 25 pages
Book Rating : 4.:/5 (13 download)
Download or read book Does Historical Volatility Term Structure Contain Valuable Information for Predicting Volatility and Index Futures? written by Juliusz Jablecki and published by . This book was released on 2014 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: We suggest that the term structure of volatility futures (e.g. VIX futures) shows a clear pattern of dependence on the current level of VIX index. At the low level of VIX (below 20) the term structure is highly upward sloping; at the high VIX level (over 30) it is strongly downward sloping. We use those features to better predict future volatility and index futures. We begin by introducing some quantitative measures of volatility term structure (VTS) and volatility risk premium (VRP). We use them further to estimate the distance between the actual value and the fair (model) value of the VTS. We find that this distance has significant predictive power for volatility futures and index futures and we use this feature to design a simple strategy to invest in VIX index futures and S&P500.
Author : Geert Bekaert
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (894 download)
Download or read book The VIX written by Geert Bekaert and published by . This book was released on 2013 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We decompose the squared VIX index, derived from US S&P500 options prices, into the conditional variance of stock returns and the equity variance premium. The latter is increasing in risk aversion in a wide variety of economic settings. We tackle several measurement issues assessing a plethora of state-of-the-art volatility forecasting models. We then examine the predictive power of the VIX and its two components for stock market returns and economic activity. The variance premium predicts stock returns but the conditional stock market variance predicts economic activity, and is more contemporaneously correlated with financial instability than is the variance premium.
Author : Peter Williams
Publisher :
ISBN 13 :
Total Pages : 23 pages
Book Rating : 4.:/5 (13 download)
Download or read book The Ability of VIX Futures to Predict S&P 500 Volatility written by Peter Williams and published by . This book was released on 2018 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the ability of futures on the CBOE Volatility Index (VIX) to predict realized S&P 500 volatility up to seven months into the future. These forecasts are found to be significantly biased. The imposition of a priori theoretically motivated restrictions can substantially improve forecast accuracy, especially when the VIX futures are augmented with the variance risk premium. When VIX futures are compared with out-of-sample forecasts from a GJR-GARCH model, the VIX-based forecasts are found to robustly outperform during periods of high volatility. In more normal states this out-performance is less significant but still present.
Author : Torben G. Andersen
Publisher :
ISBN 13 :
Total Pages : 48 pages
Book Rating : 4.0/5 ( download)
Download or read book Construction and Interpretation of Model-free Implied Volatility written by Torben G. Andersen and published by . This book was released on 2007 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: The notion of model-free implied volatility (MFIV), constituting the basis for the highly publicized VIX volatility index, can be hard to measure with accuracy due to the lack of precise prices for options with strikes in the tails of the return distribution. This is reflected in practice as the VIX index is computed through a tail-truncation which renders it more compatible with the related concept of corridor implied volatility (CIV). We provide a comprehensive derivation of the CIV measure and relate it to MFIV under general assumptions. In addition, we price the various volatility contracts, and hence estimate the corresponding volatility measures, under the standard Black-Scholes model. Finally, we undertake the first empirical exploration of the CIV measures in the literature. Our results indicate that the measure can help us refine and systematize the information embedded in the derivatives markets. As such, the CIV measure may serve as a tool to facilitate empirical analysis of both volatility forecasting and volatility risk pricing across distinct future states of the world for diverse asset categories and time horizons.
Author : Matthew T. Moran
Publisher : CFA Institute Research Foundation
ISBN 13 : 1944960961
Total Pages : 49 pages
Book Rating : 4.9/5 (449 download)
Download or read book The VIX Index and Volatility-Based Global Indexes and Trading Instruments: A Guide to Investment and Trading Features written by Matthew T. Moran and published by CFA Institute Research Foundation. This book was released on 2020-04-28 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: During the past two decades, the Cboe Volatility Index (VIX® Index), a key measure of investor sentiment and 30-day future volatility expectations, has generated much investor attention because of its unique and powerful features. The introduction of VIX futures in 2004, VIX options in 2006, and other volatility-related trading instruments provided traders and investors access to exchange-traded vehicles for taking long and short exposures to expected S&P 500 Index volatility for a particular time frame. Certain VIX-related tradable products may provide benefits when used as tools for tail-risk hedging, diversification, risk management, or alpha generation. Gauges of expected stock market volatility for various regions include the VIX Index (United States), AXVI Index (Australia), VHSI Index (Hong Kong), NVIX Index (India) and VSTOXX Index (Europe). All five of these volatility indexes had negative correlations with their related stock indexes price movements, and all five volatility indexes rose more than 50% in 2008. Although the five volatility indexes are not investable, investors can explore VIX-based benchmark indexes that show the performance of hypothetical investment strategies using VIX futures or options. Before investing in volatility-related products, investors should closely study the pricing, roll cost, and volatility features of the tradable products and read the applicable prospectuses and risk disclosure statements.
Author : Ralf Becker
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (836 download)
Download or read book Forecast Performance of Implied Volatility and the Impact of the Volatility Risk Premium written by Ralf Becker and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Alejandro Bernales
Publisher :
ISBN 13 :
Total Pages : 37 pages
Book Rating : 4.:/5 (13 download)
Download or read book Learning and Forecasts about Option Returns Through the Volatility Risk Premium written by Alejandro Bernales and published by . This book was released on 2019 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: We use learning in an equilibrium model to explain the puzzling predictive power of the volatility risk premium (VRP) for option returns. In the model, a representative agent follows a rational Bayesian learning process in an economy under incomplete information with the objective of pricing options. We show that learning induces dynamic differences between probability measures P and Q, which produces predictability patterns from the VRP for option returns. The forecasting features of the VRP for option returns, obtained through our model, exhibit the same behaviour as those observed in an empirical analysis with S&P 500 index options.
Author : Yang-ho Park
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (931 download)
Download or read book Volatility of Volatility and Tail Risk Premiums written by Yang-ho Park and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Jin-Chuan Duan
Publisher :
ISBN 13 :
Total Pages : 24 pages
Book Rating : 4.:/5 (129 download)
Download or read book Jump and Volatility Risk Premiums Implied by VIX. written by Jin-Chuan Duan and published by . This book was released on 2011 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: An estimation method is developed for extracting the latent stochastic volatility from VIX, a volatility index for the Samp;P 500 index return produced by the Chicago Board Options Exchange (CBOE) using the so-called model-free volatility construction. Our model specification encompasses all mean-reverting stochastic volatility option pricing models with a constant-elasticity of variance and those allowing for price jumps under stochastic volatility. Our approach is made possible by linking the latent volatility to the VIX index via a new theoretical relationship under the risk-neutral measure. Because option prices are not directly used in estimation, we can avoid the computational burden associated with option valuation for stochastic volatility/jump option pricing models. Our empirical findings are: (1) incorporating a jump risk factor is critically important; (2) the jump and volatility risks are priced; and (3) the popular square-root stochastic volatility process is a poor model specification irrespective of allowing for price jumps or not.
Author : Chris Bardgett
Publisher :
ISBN 13 :
Total Pages : 69 pages
Book Rating : 4.:/5 (13 download)
Download or read book Inferring Volatility Dynamics and Risk Premia from the S&P 500 and VIX Markets written by Chris Bardgett and published by . This book was released on 2017 with total page 69 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper shows that the VIX market contains information that is not already contained by the S&P 500 market on the variance of the S&P 500 returns. We estimate a flexible affine model based on a joint time series of underlying indexes and option prices on both markets. We find that including VIX option prices in the model estimation allows better identification of the parameters driving the risk-neutral conditional distributions and term structure of volatility, thereby enhancing the estimation of the variance risk premium. We gain new insights on the properties of the premium's term structure and show how they can be used to form trading signals. Finally, our premium has better predictive power than the usual model-free estimate and the higher-order moments of its term structure allow improving forecasts of S&P 500 returns.
Author : Russell Rhoads
Publisher : John Wiley & Sons
ISBN 13 : 1118118480
Total Pages : 293 pages
Book Rating : 4.1/5 (181 download)
Download or read book Trading VIX Derivatives written by Russell Rhoads and published by John Wiley & Sons. This book was released on 2011-07-11 with total page 293 pages. Available in PDF, EPUB and Kindle. Book excerpt: A guide to using the VIX to forecast and trade markets Known as the fear index, the VIX provides a snapshot of expectations about future stock market volatility and generally moves inversely to the overall stock market. Trading VIX Derivatives will show you how to use the Chicago Board Options Exchange's S&P 500 volatility index to gauge fear and greed in the market, use market volatility to your advantage, and hedge stock portfolios. Engaging and informative, this book skillfully explains the mechanics and strategies associated with trading VIX options, futures, exchange traded notes, and options on exchange traded notes. Many market participants look at the VIX to help understand market sentiment and predict turning points. With a slew of VIX index trading products now available, traders can use a variety of strategies to speculate outright on the direction of market volatility, but they can also utilize these products in conjunction with other instruments to create spread trades or hedge their overall risk. Reviews how to use the VIX to forecast market turning points, as well as reveals what it takes to implement trading strategies using VIX options, futures, and ETNs Accessible to active individual traders, but sufficiently sophisticated for professional traders Offers insights on how volatility-based strategies can be used to provide diversification and enhance returns Written by Russell Rhoads, a top instructor at the CBOE's Options Institute, this book reflects on the wide range of uses associated with the VIX and will interest anyone looking for profitable new forecasting and trading techniques.
