On VIX futures in the rough Bergomi model

DOI10.1080/14697688.2017.1353127zbMATH Open1400.91596arXiv1701.04260OpenAlexW2576267689MaRDI QIDQ4554409FDOQ4554409

Authors: Antoine Jacquier, Claude Martini, Aitor Muguruza 

Publication date: 14 November 2018

Published in: Quantitative Finance (Search for Journal in Brave)

Abstract: The rough Bergomi model introduced by Bayer, Friz and Gatheral has been outperforming conventional Markovian stochastic volatility models by reproducing implied volatility smiles in a very realistic manner, in particular for short maturities. We investigate here the dynamics of the VIX and the forward variance curve generated by this model, and develop efficient pricing algorithms for VIX futures and options. We further analyse the validity of the rough Bergomi model to jointly describe the VIX and the SPX, and present a joint calibration algorithm based on the hybrid scheme by Bennedsen, Lunde and Pakkanen.

Full work available at URL: https://arxiv.org/abs/1701.04260

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zbMATH Keywords

fractional Brownian motionimplied volatilityVIX futuresrough BergomiVIX smile

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) Fractional processes, including fractional Brownian motion (60G22)

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Cited In (28)

• Pathwise large deviations for the rough Bergomi model
• Turbocharging Monte Carlo pricing for the rough Bergomi model
• Forward variance dynamics: Bergomi's model revisited
• Asymptotic behaviour of randomised fractional volatility models
• Optimal hedging under fast-varying stochastic volatility
• Black-Scholes in a CEV random environment
• Option pricing under fast-varying and rough stochastic volatility
• Volatility options in rough volatility models
• Semiparametric estimation and inference on the fractal index of Gaussian and conditionally Gaussian time series data
• Implied higher order moments in the Heston model: a case study of S\&P500 index
• VIX pricing in the rBergomi model under a regime switching change of measure
• Asymptotics for volatility derivatives in multi-factor rough volatility models
• Bounds for VIX futures given S{\&}P 500 smiles
• The Zumbach effect under rough Heston
• Inversion of convex ordering in the VIX market
• Infinite-dimensional polynomial processes
• Pricing and hedging of VIX options for Barndorff-Nielsen and Shephard models
• Solving parametric fractional differential equations arising from the rough Heston model using quasi-linearization and spectral collocation
• Refinement by reducing and reusing random numbers of the hybrid scheme for Brownian semistationary processes
• On the martingale property in the rough Bergomi model
• Time-inhomogeneous Gaussian stochastic volatility models: large deviations and super roughness
• Small-time moderate deviations for the randomised Heston model
• The VIX Future in Bergomi Models: Fast Approximation Formulas and Joint Calibration with S&P 500 Skew
• Hierarchical adaptive sparse grids and quasi-Monte Carlo for option pricing under the rough Bergomi model
• Impact of rough stochastic volatility models on long-term life insurance pricing
• On VIX futures in the rough Bergomi model
• Deep learning volatility: a deep neural network perspective on pricing and calibration in (rough) volatility models
• Functional quantization of rough volatility and applications to volatility derivatives

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