Statistics Seminar（2016-22）

Topic:Instantaneous Squared VIX and VIX Derivatives

Speaker:Xingguo Luo, Zhejiang University

Time:Thursday, 3 November, 14:00-15:00

Place:Room 217, Guanghua Building 2

Abstract

In this paper, we provide a unified theoretical model to price derivatives written on VIXs with different horizons. Our theory is built on an existing concept of the instantaneous squared VIX (ISVIX) that is the sum of instantaneous diffusive and jump variances of the SPX return. Modeling the ISVIX as a mean-reverting jump diffusion process with a stochastic long-term mean, we obtain analytical formulas for VIX options and futures. Calibration with VIX options with a market-implied volatility surface shows that our model is capable of capturing efficiently complete information from the VIX derivatives market on the dynamics of the SPX.

Introduction:

Dr. Xingguo Luo is an Associate Professor and Distinguished Young Scholar in Finance, School of Economics, Zhejiang University. His main research interests are asset pricing, VIX derivatives and credit risk. He has published research works in the Journal of Financial Markets, Journal of Futures Markets, Pacific-Basin Finance Journal and Finance Research Letters. He actively presented his papers in major international finance conferences and served as Session Chair for Financial Management Association (FMA, 2010) and Asian Finance Association (AsianFA, 2012) annual meetings. He also received research grants from the CME Group Foundation in 2012, National Science Foundation of China in 2013, and best paper awards from the 13th and 14th International Symposium on Financial System Engineering and Risk Management in 2015 and 2016.

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