The CBOE S&P 500 three‐month variance futures

Jin E. Zhang and Yuqin Huang ()

Journal of Futures Markets, 2010, vol. 30, issue 1, 48-70

Abstract: In this article, we study the market of the Chicago Board Options Exchange S&P 500 three‐month variance futures that were listed on May 18, 2004. By using a simple mean‐reverting stochastic volatility model for the S&P 500 index, we present a linear relation between the price of fixed time‐to‐maturity variance futures and the VIX-super-2. The model prediction is supported by empirical tests. We find that a model with a fixed mean‐reverting speed of 1.2929 and a daily‐calibrated floating long‐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 30‐day realized variance and VIX-super-2 has a mean value of −19.1184. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 30:48–70, 2010

Date: 2010
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