Download or read book The Relationship Between VIX Futures Term Structure and S P500 Returns written by Athanasios Fassas and published by . This book was released on 2016 with total page 19 pages. Available in PDF, EPUB and Kindle. Book excerpt: The current paper tests and documents the relationship between the term structure of VIX futures and the underlying equity returns. Furthermore, it investigates the signaling effects of VIX futures term structure in respect to future stock index movements. The objective of this empirical analysis is to verify if a steep upward-sloping term structure indicates a late phase of a bullish trend and conversely if an extreme negative term structure suggests an over-sold market, as certain market participants believe.The empirical findings of this study suggest that there is a strong statistical significant positive contemporaneous relationship between the changes in the VIX futures term structure and the returns of the underlying equity index. Finally, the econometric analysis lends some support to the hypothesis that the term structure of VIX futures can be used as a contrarian indicator for investing in the equity market.
Download or read book A Note of Trading the Term Structure of VIX Futures written by Anusar Farooqui and published by . This book was released on 2020 with total page 11 pages. Available in PDF, EPUB and Kindle. Book excerpt: The term structure of VIX futures contains a very strong signal of dealer risk appetite. Unlike balance sheet quantities, this feature is available at very high frequencies. Here we exhibit two systematic strategies to mine the attendant risk premium from the term structure of expected volatility. We optimize our two hyper-parameters by OOS cross-validation. We compare our strategies to holding the S&P 500, selling short-term vol un-hedged, and a portfolio that sells short-term vol and hedges by going long on medium-term vol. We find that our strategies allow us to harvest a considerable portion of the risk premium associated with the balance sheet management of market-based intermediaries. Both in-sample and OOS, the risk-adjusted returns on our strategies are at least twice as high as the three benchmarks.
Download or read book The Causal Relationship between the S P 500 and the VIX Index written by Florian Auinger and published by Springer. This book was released on 2015-02-13 with total page 102 pages. Available in PDF, EPUB and Kindle. Book excerpt: Florian Auinger highlights the core weaknesses and sources of criticism regarding the VIX Index as an indicator for the future development of financial market volatility. Furthermore, it is proven that there is no statistically significant causal relationship between the VIX and the S&P 500. As a consequence, the forecastability is not given in both directions. Obviously, there must be at least one additional variable that has a strong influence on market volatility such as emotions which, according to financial market experts, are considered to play a more and more important role in investment decisions.
Download or read book Risk Premia and the VIX Term Structure written by Travis L. Johnson and published by . This book was released on 2018 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: The shape of the VIX term structure conveys information about the price of variance risk rather than expected changes in the VIX, a rejection of the expectations hypothesis. A single principal component, Slope, summarizes nearly all this information, predicting the excess returns of S&P 500 variance swaps, VIX futures, and S&P 500 straddles for all maturities and to the exclusion of the rest of the term structure. Slope's predictability is incremental to other proxies for the conditional variance risk premia, is economically significant, and can only partially be explained by variations in observable risk measures.
Download or read book Directional Exposure to Volatility via Listed Futures S P 500 VIX Short Term Futures Index written by Global Research & Design S&P Dow Jones Indices and published by . This book was released on 2009 with total page 9 pages. Available in PDF, EPUB and Kindle. Book excerpt: Volatility has emerged as an important asset class in the last decade. It is actively traded through over-the counter swaps, and more recently through exchange listed VIX futures and options. While VIX has achieved widespread recognition, it remains very challenging to replicate spot VIX. The Samp;P 500 VIX Short-Term Futures Index is the first index to offer replicable, directional exposure to volatility using exchange-listed futures contracts. The index is comprised of two near term VIX futures contracts, which are rebalanced daily in equal increments in order to maintain a constant one month maturity. While the correlation between spot VIX and the Samp;P 500 VIX Short-Term Futures Index is not perfect, it is a healthy 87%. More importantly, the correlation of the index to the Samp;P 500 is -76%, similar to the correlation of spot VIX to the Samp;P 500 of -74%. The index has a positive return 95% of the time that the Samp;P 500 has a loss of more than 1%. During days of sharp market declines, index returns are usually greater in value than corresponding Samp;P 500 losses. Dedicated long positions in the index are expected to decline during normal volatility regimes. Not only is volatility mean reverting to a theoretical expected long term return of zero, but the index is also expected to suffer from roll loss due to term structure decay. Conversely, short positions in the index provide exposure to a forward starting volatility arbitrage strategy.
Download or read book The Information Content of the Implied Volatility Term Structure on Future Returns written by Yaw-Huei Wang and published by . This book was released on 2017 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: We derive the theoretical relation between the term structure of implied variance and the expected excess returns of the underlying asset. Adopting three alternative approaches to compile the variables representing the information on the implied volatility index level and term structure, we show the important role of the term structure in determining future excess returns of the S&P 500 index. Both the in-sample and out-of-sample analyses suggest that the information content of the term structure variable is significant and a strong complement to that of the level variable, especially for shorter-term excess returns.
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.
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.
Download or read book Trading VIX Derivatives written by Russell Rhoads and published by John Wiley & Sons. This book was released on 2011-08-09 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.
Download or read book Trading Volatility written by Colin Bennett and published by . This book was released on 2014-08-17 with total page 316 pages. Available in PDF, EPUB and Kindle. Book excerpt: This publication aims to fill the void between books providing an introduction to derivatives, and advanced books whose target audience are members of quantitative modelling community. In order to appeal to the widest audience, this publication tries to assume the least amount of prior knowledge. The content quickly moves onto more advanced subjects in order to concentrate on more practical and advanced topics. "A master piece to learn in a nutshell all the essentials about volatility with a practical and lively approach. A must read!" Carole Bernard, Equity Derivatives Specialist at Bloomberg "This book could be seen as the 'volatility bible'!" Markus-Alexander Flesch, Head of Sales & Marketing at Eurex "I highly recommend this book both for those new to the equity derivatives business, and for more advanced readers. The balance between theory and practice is struck At-The-Money" Paul Stephens, Head of Institutional Marketing at CBOE "One of the best resources out there for the volatility community" Paul Britton, CEO and Founder of Capstone Investment Advisors "Colin has managed to convey often complex derivative and volatility concepts with an admirable simplicity, a welcome change from the all-too-dense tomes one usually finds on the subject" Edmund Shing PhD, former Proprietary Trader at BNP Paribas "In a crowded space, Colin has supplied a useful and concise guide" Gary Delany, Director Europe at the Options Industry Council
Download or read book A Complete Guide to the Futures Market written by Jack D. Schwager and published by John Wiley & Sons. This book was released on 2017-01-03 with total page 723 pages. Available in PDF, EPUB and Kindle. Book excerpt: The essential futures market reference guide A Complete Guide to the Futures Market is the comprehensive resource for futures traders and analysts. Spanning everything from technical analysis, trading systems, and fundamental analysis to options, spreads, and practical trading principles, A Complete Guide is required reading for any trader or investor who wants to successfully navigate the futures market. Clear, concise, and to the point, this fully revised and updated second edition provides a solid foundation in futures market basics, details key analysis and forecasting techniques, explores advanced trading concepts, and illustrates the practical application of these ideas with hundreds of market examples. A Complete Guide to the Futures Market: Details different trading and analytical approaches, including chart analysis, technical indicators and trading systems, regression analysis, and fundamental market models. Separates misleading market myths from reality. Gives step-by-step instruction for developing and testing original trading ideas and systems. Illustrates a wide range of option strategies, and explains the trading implications of each. Details a wealth of practical trading guidelines and market insights from a recognized trading authority. Trading futures without a firm grasp of this market’s realities and nuances is a recipe for losing money. A Complete Guide to the Futures Market offers serious traders and investors the tools to keep themselves on the right side of the ledger.
Download or read book The VIX Trader s Handbook written by Russell Rhoads and published by Harriman House Limited. This book was released on 2020-10-27 with total page 161 pages. Available in PDF, EPUB and Kindle. Book excerpt: Russell Rhoads is one of America’s leading experts on VIX, the Volatility Index. In The VIX Trader’s Handbook he takes a deep dive into all things associated with volatility indexes and related trading vehicles. The handbook begins with an explanation of what VIX is, how it is calculated, and why it behaves the way it does in various market environments. It also explains the various methods of getting exposure to volatility through listed markets. The focus then moves on to demonstrate how traders take advantage of various scenarios using futures, options, or ETPs linked to the performance of VIX. Finally, a comprehensive review is presented of volatility events that shook the markets, including the 1987 crash, Great Financial Crisis, 2010 flash crash, and the 2020 pandemic. By understanding how VIX behaved leading up to these market shocks, and reacted afterwards, traders can better equip themselves ahead of future events. A wide variety of strategies that are implemented in both bearish and bullish equity markets are introduced and covered extensively throughout. The VIX Trader’s Handbook is essential reading for all those who are intending to trade volatility—from those who wish to gain an understanding of how VIX and the related trading products behave, to those intending to hedge equity exposure or take advantage of the persistent overpricing of option volatility. You won’t want to trade volatility without it.
Download or read book Pricing Models of Volatility Products and Exotic Variance Derivatives written by Yue Kuen Kwok and published by CRC Press. This book was released on 2022-05-08 with total page 283 pages. Available in PDF, EPUB and Kindle. Book excerpt: Pricing Models of Volatility Products and Exotic Variance Derivatives summarizes most of the recent research results in pricing models of derivatives on discrete realized variance and VIX. The book begins with the presentation of volatility trading and uses of variance derivatives. It then moves on to discuss the robust replication strategy of variance swaps using portfolio of options, which is one of the major milestones in pricing theory of variance derivatives. The replication procedure provides the theoretical foundation of the construction of VIX. This book provides sound arguments for formulating the pricing models of variance derivatives and establishes formal proofs of various technical results. Illustrative numerical examples are included to show accuracy and effectiveness of analytic and approximation methods. Features Useful for practitioners and quants in the financial industry who need to make choices between various pricing models of variance derivatives Fabulous resource for researchers interested in pricing and hedging issues of variance derivatives and VIX products Can be used as a university textbook in a topic course on pricing variance derivatives
Download or read book Research in Finance written by John W. Kensinger and published by Emerald Group Publishing. This book was released on 2012-05-16 with total page 300 pages. Available in PDF, EPUB and Kindle. Book excerpt: The theme of this volume is "Dealing with Volatility and Enhancing Performance". During a time when there is much concern about the perceived volatility of global equity markets, the insights offered here could be reassuring as well as useful.
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 288 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 ofexpectations about future stock market volatility and generallymoves inversely to the overall stock market. Trading VIXDerivatives will show you how to use the Chicago Board OptionsExchange's S&P 500 volatility index to gauge fear and greed inthe market, use market volatility to your advantage, and hedgestock portfolios. Engaging and informative, this book skillfullyexplains the mechanics and strategies associated with trading VIXoptions, futures, exchange traded notes, and options on exchangetraded notes. Many market participants look at the VIX to help understandmarket sentiment and predict turning points. With a slew of VIXindex trading products now available, traders can use a variety ofstrategies to speculate outright on the direction of marketvolatility, but they can also utilize these products in conjunctionwith other instruments to create spread trades or hedge theiroverall risk. Reviews how to use the VIX to forecast market turning points,as well as reveals what it takes to implement trading strategiesusing VIX options, futures, and ETNs Accessible to active individual traders, but sufficientlysophisticated for professional traders Offers insights on how volatility-based strategies can be usedto provide diversification and enhance returns Written by Russell Rhoads, a top instructor at the CBOE'sOptions Institute, this book reflects on the wide range of usesassociated with the VIX and will interest anyone looking forprofitable new forecasting and trading techniques.
Download or read book Market Tremors written by Hari P. Krishnan and published by Springer Nature. This book was released on 2021-09-14 with total page 257 pages. Available in PDF, EPUB and Kindle. Book excerpt: Since the Global Financial Crisis, the structure of financial markets has undergone a dramatic shift. Modern markets have been “zombified” by a combination of Central Bank policy, disintermediation of commercial banks through regulation, and the growth of passive products such as ETFs. Increasingly, risk builds up beneath the surface, through a combination of excessive leverage and crowded exposure to specific asset classes and strategies. In many cases, historical volatility understates prospective risk. This book provides a practical and wide ranging framework for dealing with the credit, positioning and liquidity risk that investors face in the modern age. The authors introduce concrete techniques for adjusting traditional risk measures such as volatility during this era of unprecedented balance sheet expansion. When certain agents in the financial network behave differently or in larger scale than they have in the past, traditional portfolio theory breaks down. It can no longer account for toxic feedback effects within the network. Our feedback-based risk adjustments allow investors to size their positions sensibly in dangerous set ups, where volatility is not providing an accurate barometer of true risk. The authors have drawn from the fields of statistical physics and game theory to simplify and quantify the impact of very large agents on the distribution of forward returns, and to offer techniques for dealing with situations where markets are structurally risky yet realized volatility is low. The concepts discussed here should be of practical interest to portfolio managers, asset allocators, and risk professionals, as well as of academic interest to scholars and theorists.
Download or read book Alternative Investments written by CAIA Association and published by John Wiley & Sons. This book was released on 2020-09-28 with total page 960 pages. Available in PDF, EPUB and Kindle. Book excerpt: Whether you are a seasoned professional looking to explore new areas within the alternative investment arena or a new industry participant seeking to establish a solid understanding of alternative investments, Alternative Investments: An Allocator's Approach, Fourth Edition (CAIA Level II curriculum official text) is the best way to achieve these goals. In recent years, capital formation has shifted dramatically away from public markets as issuers pursue better financial and value alignment with ownership, less onerous and expensive regulatory requirements, market and information dislocation, and liberation from the short-term challenges that undergird the public capital markets. The careful and informed use of alternative investments in a diversified portfolio can reduce risk, lower volatility, and improve returns over the long-term, enhancing investors' ability to meet their investment outcomes. Alternative Investments: An Allocator's Approach (CAIA Level II curriculum official text) is a key resource that can be used to improve the sophistication of asset owners and those who work with them. This text comprises the curriculum, when combined with supplemental materials available at caia.org, for the CAIA Level II exam. "Over the course of my long career one tenet has held true, 'Continuing Education'. Since CalSTRS is a teachers' pension plan, it is no surprise that continuing education is a core attribute of our Investment Office culture. Overseeing one of the largest institutional pools of capital in the world requires a cohesive knowledge and understanding of both public and private market investments and strategies. We must understand how these opportunities might contribute to delivering on investment outcomes for our beneficiaries. Alternative Investments: An Allocator's Approach is the definitive core instruction manual for an institutional investor, and it puts you in the captain's chair of the asset owner." —Christopher J. Ailman, Chief Investment Officer, California State Teachers’ Retirement System "Given their diversified cash flow streams and returns, private markets continue to be a growing fixture of patient, long-term portfolios. As such, the need to have proficiency across these sophisticated strategies, asset classes, and instruments is critical for today's capital allocator. As a proud CAIA charterholder, I have seen the practical benefits in building a strong private markets foundation, allowing me to better assist my clients." —Jayne Bok, CAIA, CFA, Head of Investments, Asia, Willis Tower Watson
