AUT LibraryAUT
View Item 
  •   Open Research
  • AUT Faculties
  • Faculty of Design and Creative Technologies (Te Ara Auaha)
  • School of Engineering, Computer and Mathematical Sciences - Te Kura Mātai Pūhanga, Rorohiko, Pāngarau
  • View Item
  •   Open Research
  • AUT Faculties
  • Faculty of Design and Creative Technologies (Te Ara Auaha)
  • School of Engineering, Computer and Mathematical Sciences - Te Kura Mātai Pūhanga, Rorohiko, Pāngarau
  • View Item
JavaScript is disabled for your browser. Some features of this site may not work without it.

An analytical formula for VIX futures and its applications

Lian, G; Zhu, SP
Thumbnail
View/Open
Zhu_Lian_JFM_1.pdf (177.8Kb)
Permanent link
http://hdl.handle.net/10292/1690
Metadata
Show full metadata
Abstract
In this study we present a closed-form, exact solution for the pricing of VIX futures in a stochastic volatility model with simultaneous jumps in both the asset price and volatility processes. The newly derived formula is then used to show that the well-known convexity correction approximations can sometimes lead to large errors. Utilizing the newly derived formula, we also conduct an empirical study, the results of which demonstrate that the Heston stochastic volatility model is a good candidate for the pricing of VIX futures. While incorporating jumps into the underlying price can further improve the pricing of VIX futures, adding jumps to the volatility process appears to contribute little improvement for pricing VIX futures.
Date
February 8, 2011
Source
The Journal of Futures Markets, vol.00(00), pp.1–25
Item Type
Journal Article
Publisher
Wiley Periodicals, Inc.
DOI
10.1002/fut.20512
Publisher's Version
http://onlinelibrary.wiley.com/doi/10.1002/fut.20512/abstract
Rights Statement
© 2011 Wiley Periodicals, Inc. John Wiley & Sons. All rights reserved. Authors retain the right to place his/her pre-publication version of the work on a personal website or institutional repository. This article may not exactly replicate the final version published in (please see citation) as it is not a copy of this record. An electronic version of this article can be found online at: (Please see Publisher’s Version)

Contact Us
  • Admin

Hosted by Tuwhera, an initiative of the Auckland University of Technology Library

 

 

Browse

Open ResearchTitlesAuthorsDateSchool of Engineering, Computer and Mathematical Sciences - Te Kura Mātai Pūhanga, Rorohiko, PāngarauTitlesAuthorsDate

Alternative metrics

 

Statistics

For this itemFor all Open Research

Share

 
Follow @AUT_SC

Contact Us
  • Admin

Hosted by Tuwhera, an initiative of the Auckland University of Technology Library