Constructing Zero-Beta VIX Portfolios with Dynamic CAPM

Jiaqi Chen and Michael Tindall

No 14-1, Occasional Papers from Federal Reserve Bank of Dallas

Abstract: This paper focuses on actively managed portfolios of VIX derivatives constructed to reduce portfolio correlation with the equity market. We find that the best results are obtained using Kalman filter-based dynamic CAPM. The portfolio construction method is capable of constructing zero-beta portfolios with positive alpha.

Keywords: Kalman filter; VIX features; VIX; dynamic CAPM; zero beta (search for similar items in EconPapers)
Pages: 21 pages
Date: 2014-06-01
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