Consistent modeling of S&P 500 and VIX derivatives

This study introduces a model that identifies relationships between stylized features on S&P 500, VIX and derivatives on VIX. The paper considers a specification with discontinuous correlated jumps in stock prices and stock price volatility with state-dependent arrival intensity, and examines how these factors impact VIX option pricing and hedging. The paper finds strong evidence for jumps in volatility and jumps in returns implicit in VIX option data.

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Year of publication:	2010
Authors:	Lin, Yueh-Neng ; Chang, Chien-Hung
Published in:	Journal of Economic Dynamics and Control. - Elsevier, ISSN 0165-1889. - Vol. 34.2010, 11, p. 2302-2319
Publisher:	Elsevier
Keywords:	VIX option Stochastic volatility Jumps State-dependent jump frequency Delta hedging

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Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10008864732