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The CBOE S&P 500 three-month variance futures

โœ Scribed by Jin E. Zhang; Yuqin Huang

Book ID
102842691
Publisher
John Wiley and Sons
Year
2010
Tongue
English
Weight
722 KB
Volume
30
Category
Article
ISSN
0270-7314

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โœฆ Synopsis

Abstract

In this article, we study the market of the Chicago Board Options Exchange S&P 500 threeโ€month variance futures that were listed on May 18, 2004. By using a simple meanโ€reverting stochastic volatility model for the S&P 500 index, we present a linear relation between the price of fixed timeโ€toโ€maturity variance futures and the VIX^2^. The model prediction is supported by empirical tests. We find that a model with a fixed meanโ€reverting speed of 1.2929 and a dailyโ€calibrated floating longโ€term mean level has a good fit to the market data between May 18, 2004, and August 17, 2007. The market price of volatility risk estimated from the 30โ€day realized variance and VIX^2^ has a mean value of โˆ’19.1184. ยฉ 2009 Wiley Periodicals, Inc. Jrl Fut Mark 30:48โ€“70, 2010

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