Economics at your fingertips  

Modeling VXX

Sebastian A. Gehricke and Jin E. Zhang

Journal of Futures Markets, 2018, vol. 38, issue 8, 958-976

Abstract: In this paper, we study the VXX Exchange Traded Note (ETN), that has been actively traded in recent years, but has lost 99.84% of its value. Using Zhang's formula for VIX futures prices, we develop the first theoretical model for the VXX that links the SPX, VIX, and VXX. We show that the roll yield of VIX futures drives the difference between the VXX and VIX returns. The roll yield is a mostly negative process. We then provide a simple yet robust estimation of the market price of variance risk using VXX and VIX futures prices. The model can be used to price VXX options.

Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0270-7314

Access Statistics for this article

Journal of Futures Markets is currently edited by Robert I. Webb

More articles in Journal of Futures Markets from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().

Page updated 2020-07-04
Handle: RePEc:wly:jfutmk:v:38:y:2018:i:8:p:958-976