Time-Varying Skew in VIX Derivatives Pricing

• 成果类型: Article
• 署名作者: Yuan, Peixuan
• 署名单位: Renmin University of China
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2021.4168
• 发表日期: 2022
• 页码: 7761-7791
• 关键词: VIX derivatives; cojumps; jump intensity; CENTRAL TENDENCY; implied volatility surface

摘要

This paper proposes a new reduced-form model for the pricing of VIX derivatives that includes an independent stochastic jump intensity factor and cojumps in the level and variance of VIX, while allowing the mean of VIX variance to be time varying. I fit the model to daily prices of futures and European options from April 2007 through December 2017. The empirical results indicate that the model significantly outperforms all other nested models and improves on benchmark by 21.6% in sample and 31.2% out of sample. The model more accurately portrays the tail behavior of VIX risk-neutral distribution for both short and long maturities, as it better captures the time-varying skew found to be largely independent of the level of the VIX smile.