A New Model for the Joint Valuation of S&P 500 and VIX Options: Specification Analysis

• 成果类型: Article
• 署名作者: Yuan, Peixuan
• 署名单位: Hong Kong Baptist University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2022.00327
• 发表日期: 2025
• 关键词: Option pricing; S&P 500 and VIX joint valuation; higher-order moments; specification analysis; model features

摘要

Analyzing the specifications of pricing models for the joint valuation of S&P 500 and VIX options, I find that the existing models cannot adequately represent the two options markets. I introduce a new factor that controls the higher-order moments of the risk-neutral return distribution. The model I propose significantly outperforms all other alternatives, and particularly improves on the benchmark two-variance-factor model with cojumps by 23.66% in-sample and 31.64% out-of-sample. The performance analysis shows that the better fit results from improvements in the modeling of both S&P 500 and VIX options, highlighting the model features that are critical for reconciling the two markets.