Research ArticleOpen AccessGoogle Scholar indexed
VIX and VIX Futures Pricing Algorithms: Cultivating Understanding
Finance University of Missouri-St. Louis, University Blvd
- 1 Finance University of Missouri-St. Louis, University Blvd
Copy link · social · email
Abstract
This article reviews the development of the S&P 500 volatility index and uses market information to develop algorithms which aid in clarifying some of the salient points in the determination of an index value. Understanding the pertinent points provides insight into the interpretation and limitations of the usefulness of the VIX and other VIX-type contracts.
KeywordsVIX PricingVIX FuturesVIX OptionsVolatility Index
- F. A. J. Korthagen and J. P. Kessels, “Linking Theory and Practice: Changing the Pedagogy of Teacher Education,” Educational Researcher, Vol. 28, No. 4, 1999, pp. 4-17.
- S. Eric, “The Gap Between Theory and Practice,” MIT Sloan, Cambridge, 2008.
- W. Charles and M. Joseph, “Innovative Instructional Methods for Technical Subject Matter with Non-Technical Pedagogy: A Statistical Analysis,” Advances in Management, Vol. 2, No. 4, 2009, pp. 57-65.
- R. E. Whaley, “Derivatives on Market Volatility: Hedging Tools Long Overdue,” Journal of Derivatives, Vol. 1, No. 1, 1993, pp. 71-84. http://dx.doi.org/10.3905/jod.1993.407868
- “Educational Innovation in Economics and Business,” 17th EDiNEB Conference, 9-11 June 2010.
- P. Dennis, M. Stewart and C. Stivers, “Stock Reports, Implied Volatility Invvovations and the Asymmetric Volatility Phenomenon,” Journal of Finance and Quantitative Analysis, Vol. 41, No. 2, 2006, pp. 381-407. http://dx.doi.org/10.1017/S0022109000002118
- M. W. Brandt and Q. Kang, “On the Relationship between the Conditional Mean and Volatility of Stock Returns: A Latent VAR Approach,” Journal of Financial Economics, Vol. 72, No. 2, 2004, pp. 217-257. http://dx.doi.org/10.1016/j.jfineco.2002.06.001
- T. J. Ypma, “Historical Development of the Newton-Raphson Method,” SIAM Review, Vol. 37, No. 4, 1995, pp. 531- 551. http://dx.doi.org/10.1137/1037125
- E. Derman and K. Iraj, “Riding the Smile,” Journal of Risk, Vol. 7, No. 2, 1994, pp. 32-39.
- C. Corrado and S. Tie, “Skewness and Kurtosis in S&P 500 Index Returns Implied by Option Prices,” Journal of Financial Research, Vol. 19, No. 2, 1996, pp. 175-192.
- I. Pe?a, G. Rubio and G. Serna, “Why do We Smile? On the Determinants of the Implied Volatility Function,” Journal of Banking and Finance, Vol. 23, No. 8, 1999, pp. 1151-1179. http://dx.doi.org/10.1016/S0378-4266(98)00134-4
- F. Black and S. Myron, “The Pricing of Options and Corporate Liabilities,” Journal of Political Economy, Vol. 81, No. 3, 1973, pp. 637-654. http://dx.doi.org/10.1086/260062
- Z. G. Wang and D. Robert, “The Performance of VIX Option Pricing Models: Empirical Evidence beyond Simulation,” Journal of Futures Markets, Vol. 31, No. 3, 2011, pp. 251-281.
- F. Black, “The Pricing of Commodity Contracts,” Journal of Financial Economics, Vol. 3, No. 1-2, 1976, pp. 167-179. http://dx.doi.org/10.1016/0304-405X(76)90024-6