The Term Structure of VIX |
| |
| Authors: | Xingguo Luo Jin E Zhang |
| |
| Institution: | 1. Xingguo Luo is an Assistant Professor at the College of Economics and Academy of Financial Research, Zhejiang University, Hangzhou, China;2. Jin E. Zhang is an Associate Professor at the School of Economics and Finance, The University of Hong Kong, Hong Kong and Department of Accountancy and Finance, School of Business, University of Otago, New Zealand |
| |
| Abstract: | In this study, we extend the Chicago Board Options Exchange volatility index, VIX, from 30‐day to any arbitrary time‐to‐maturity, and study the term structure of VIX. We propose new concepts of instantaneous and long‐term squared VIXs as the limits at the short and long ends of the term structure respectively. Modeling the volatility process with instantaneous and long‐term squared VIXs, we establish a parsimonious approach to capture information contained in the term structure of VIX. Our study provides an efficient setup to further study the pricing of VIX derivatives and their relation with S&P 500 options. |
| |
| Keywords: | |
|
|
