VIX futures pricing with conditional skewness

We develop a closed‐form VIX futures valuation formula based on the inverse Gaussian GARCH process by Christoffersen et al. that combines conditional skewness, conditional heteroskedasticity, and a leverage effect. The new model outperforms the benchmark in fitting the S&P 500 returns and the VIX futures prices. The fat‐tailed innovation underlying the model substantially reduced pricing errors during the 2008 financial crisis. The in‐ and out‐of‐sample pricing performance indicates that the new model should be a default modeling choice for pricing the medium‐ and long‐term VIX futures.