Volatility information implied in the term structure of VIX

Kai‐Jiun Chang, Mao‐Wei Hung, Yaw‐Huei Wang and Kuang‐Chieh Yen

Journal of Futures Markets, 2019, vol. 39, issue 1, 56-71

Abstract: This study uses multiple maturity‐independent variables to examine whether the volatility information implied in the term structure of volatility index can improve the prediction of realized volatility. The empirical results for the S&P 500 index show that, in terms of both the in‐sample estimation and out‐of‐sample forecasting, the term structure variables provide substantial incremental contribution to the models with only level variables. Our empirical results are robust to various forms of volatility, alternative ways to develop the term structure variable, the impact of macroeconomic variables, and alternative underlying assets.

Date: 2019
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https://doi.org/10.1002/fut.21964

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