Volatility as an Asset Class

Tom Nohel and Steven K. Todd

Chapter 14 in The World Scientific Handbook of Futures Markets, 2015, pp 437-464 from World Scientific Publishing Co. Pte. Ltd.

Abstract: In this chapter, we discuss the development and evolution of the CBOE's volatility index or VIX, the correlation structure of VIX with other assets, and we highlight hedge fund strategies that are exposed to volatility and that could therefore potentially benefit from the existence of derivatives that reference VIX. We also describe the development of the markets for VIX derivatives and detail their structure, as well as the development of pricing models for VIX derivatives. Finally, we describe the development of exchange-traded products (ETPs) that reference volatility, and we analyze the structure of these products. We conclude with an analysis of the performance of VIX-related ETPs, and we test the performance of simple technical trading rules that use ETPs that reference VIX. These have all been crucial to the development of volatility as a separate asset class.

Keywords: Futures Markets; Pricing; Risk Management; Futures Trading; Stock Indexes; Interest Rates; Futures Prices; Portfolio Theory; Hedge Funds; Foreign Exchange (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (2)

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