Local volatility of volatility for the VIX market

DOI10.1007/S11147-012-9086-9MaRDI QIDQ385648zbMATHOpenAlexFDO

Authors Walter Farkas, Gabriel G. Drimus

Publication date 2 December 2013

Published in Review of Derivatives Research (Search for Journal in Brave)

Full work available at URL http://hdl.handle.net/20.500.11850/72334

zbMATH Keywords

volatility derivativesvolatility of volatilityVIX optionsVIX futures

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) Statistical methods; economic indices and measures (91B82) Statistical methods; risk measures (91G70) Applications of stochastic analysis (to PDEs, etc.) (60H30) Microeconomic theory (price theory and economic markets) (91B24) Stochastic models in economics (91B70) Interest rates, asset pricing, etc. (stochastic models) (91G30)

Recommendations

• Pricing VIX options in a stochastic vol-of-vol model
• Stochastic volatility models and the pricing of VIX options
• A scaled version of the double-mean-reverting model for VIX derivatives
• Bi-cubic B-spline fitting-based local volatility model with mean reversion process
• Local volatility function models under a benchmark approach

Cites work

• scientific article; zbMATH DE number 1414609 (Why is no real title available?)
• A closed-form solution for options with stochastic volatility with applications to bond and currency options
• A consistent pricing model for index options and volatility derivatives
• A new approach for option pricing under stochastic volatility
• Arbitrage-free smoothing of the implied volatility surface
• Jump-diffusion processes: volatility smile fitting and numerical methods for option pricing
• Mathematical methods for financial markets.
• Sato processes and the valuation of structured products
• The pricing of options and corporate liabilities

Cited in

(17)

• VIX MODELING FOR A MARKET INSIDER
• A general framework for a joint calibration of VIX and VXX options
• Pricing options on discrete realized variance with partially exact and bounded approximations
• Pricing VIX options with stochastic skew and asymmetric jumps
• Pure jump models for pricing and hedging VIX derivatives
• Risk-adjusted option-implied moments
• VARIANCE TERM STRUCTURE AND VIX FUTURES PRICING
• Short Communication: Inversion of Convex Ordering: Local Volatility Does Not Maximize the Price of VIX Futures
• Bi-cubic B-spline fitting-based local volatility model with mean reversion process
• Index options and volatility derivatives in a Gaussian random field risk-neutral density model
• Does VIX truly measure return volatility?
• Smile modeling in commodity markets
• Inversion of convex ordering in the VIX market
• Consistent time‐homogeneous modeling of SPX and VIX derivatives
• The VIX and future information
• Analysis of VIX markets with a time-spread portfolio
• Calculating the index of volatility in inhomogeneous Levy models

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