Extreme-strike comparisons and structural bounds for SPX and VIX options

DOI10.1137/141001615zbMATH Open1401.91523arXiv2101.00299OpenAlexW3120017495WikidataQ130039375 ScholiaQ130039375MaRDI QIDQ4579824FDOQ4579824

Authors:

Publication date: 10 August 2018

Published in: SIAM Journal on Financial Mathematics (Search for Journal in Brave)

Abstract: This article explores the relationship between the SPX and VIX options markets. High-strike VIX call options are used to hedge tail risk in the SPX, which means that SPX options are a reflection of the extreme-strike asymptotics of VIX options, and vice versa. This relationship can be quantified using moment formulas in a model-free way. Comparisons are made between VIX and SPX implied volatilities along with various examples of stochastic volatility models.

Full work available at URL: https://arxiv.org/abs/2101.00299

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zbMATH Keywords

VIX optionsmodel freemoment formulasextreme strikes

Mathematics Subject Classification ID

Portfolio theory (91G10)

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Cited In (2)

• The VIX Future in Bergomi Models: Fast Approximation Formulas and Joint Calibration with S&P 500 Skew
• Consistent time‐homogeneous modeling of SPX and VIX derivatives

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