BeVIXed: Trading Fear in the Volatility Complex

Chakravarthy Varadarajan and Klaus Schenk-Hoppé
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Chakravarthy Varadarajan: Department of Physics, School of Natural Sciences, University of Manchester, Manchester M13 9PL, UK

Risks, 2023, vol. 11, issue 5, 1-18

Abstract: We explain the evolution of the volatility market and present the infamous day of ‘Volmageddon’ as an insightful case study. Our survey focuses on the pricing and trading of volatility-linked assets, highlighting the impact of mechanical hedging in markets for futures and higher-order derivatives. We supplement the vast statistical analysis of volatility derivatives with a financial economist’s perspective.

Keywords: Volmageddon; volatility derivatives; hedging; VIX (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2023
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