English, Article edition: VARIANCE TERM STRUCTURE AND VIX FUTURES PRICING YINGZI ZHU; JIN E. ZHANG

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Physical Description
  • article
Language
  • English

Edition details

Title
  • VARIANCE TERM STRUCTURE AND VIX FUTURES PRICING
Author
  • YINGZI ZHU
  • JIN E. ZHANG
Physical Description
  • article
Notes
  • Using no arbitrage principle, we derive a relation between the drift term of risk-neutral dynamics for instantaneous variance and the term structure of forward variance. We show that the forward variance curve can be derived from options market. Based on the variance term structure, we derive a no arbitrage pricing model for VIX futures pricing. The model is the first no arbitrage model combining options market and VIX futures market. The model can be easily generalized to price other volatility derivatives.
  • Stochastic volatility, variance term structure, arbitrage-free model, volatility derivatives, VIX futures
  • RePEc:wsi:ijtafx:v:10:y:2007:i:01:p:111-127
Language
  • English
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