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A jump diffusion model for VIX volatility options and futures

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Author Info

  • Dimitris Psychoyios

    ()

  • George Dotsis

    ()

  • Raphael Markellos

    ()

Abstract

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File URL: http://hdl.handle.net/10.1007/s11156-009-0153-8
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Bibliographic Info

Article provided by Springer in its journal Review of Quantitative Finance and Accounting.

Volume (Year): 35 (2010)
Issue (Month): 3 (October)
Pages: 245-269

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Handle: RePEc:kap:rqfnac:v:35:y:2010:i:3:p:245-269

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Web page: http://springerlink.metapress.com/link.asp?id=102990

Related research

Keywords: Implied volatility; Jump diffusion; Option pricing; Volatility risk; G13; C51; C52;

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References

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  1. Darrell Duffie & Jun Pan & Kenneth Singleton, 2000. "Transform Analysis and Asset Pricing for Affine Jump-Diffusions," Econometrica, Econometric Society, vol. 68(6), pages 1343-1376, November.
  2. Nelson, Daniel B., 1990. "ARCH models as diffusion approximations," Journal of Econometrics, Elsevier, vol. 45(1-2), pages 7-38.
  3. Black, Fischer, 1976. "The pricing of commodity contracts," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 167-179.
  4. Grunbichler, Andreas & Longstaff, Francis A., 1996. "Valuing futures and options on volatility," Journal of Banking & Finance, Elsevier, vol. 20(6), pages 985-1001, July.
  5. Das, Sanjiv Ranjan & Sundaram, Rangarajan K., 1999. "Of Smiles and Smirks: A Term Structure Perspective," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 34(02), pages 211-239, June.
  6. Dotsis, George & Psychoyios, Dimitris & Skiadopoulos, George, 2007. "An empirical comparison of continuous-time models of implied volatility indices," Journal of Banking & Finance, Elsevier, vol. 31(12), pages 3584-3603, December.
  7. Steven L. Heston & Saikat Nandi, 2000. "Derivatives on volatility: some simple solutions based on observables," Working Paper 2000-20, Federal Reserve Bank of Atlanta.
  8. Peter C.B. Phillips & Jun Yu, 2003. "Jackknifing Bond Option Prices," Cowles Foundation Discussion Papers 1392, Cowles Foundation for Research in Economics, Yale University.
  9. Stein, Elias M & Stein, Jeremy C, 1991. "Stock Price Distributions with Stochastic Volatility: An Analytic Approach," Review of Financial Studies, Society for Financial Studies, vol. 4(4), pages 727-52.
  10. S. G. Kou, 2002. "A Jump-Diffusion Model for Option Pricing," Management Science, INFORMS, vol. 48(8), pages 1086-1101, August.
  11. Brenner, Menachem & Ou, Ernest Y. & Zhang, Jin E., 2006. "Hedging volatility risk," Journal of Banking & Finance, Elsevier, vol. 30(3), pages 811-821, March.
  12. Blair, Bevan J. & Poon, Ser-Huang & Taylor, Stephen J., 2001. "Forecasting S&P 100 volatility: the incremental information content of implied volatilities and high-frequency index returns," Journal of Econometrics, Elsevier, vol. 105(1), pages 5-26, November.
  13. Bakshi, Gurdip & Ju, Nengjiu & Ou-Yang, Hui, 2006. "Estimation of continuous-time models with an application to equity volatility dynamics," Journal of Financial Economics, Elsevier, vol. 82(1), pages 227-249, October.
  14. Cox, John C & Ingersoll, Jonathan E, Jr & Ross, Stephen A, 1985. "A Theory of the Term Structure of Interest Rates," Econometrica, Econometric Society, vol. 53(2), pages 385-407, March.
  15. Yingzi Zhu & Jin E. Zhang, 2007. "Variance Term Structure And Vix Futures Pricing," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 10(01), pages 111-127.
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Citations

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Cited by:
  1. Bao, Qunfang, 2013. "Mean-Reverting Logarithmic Modeling of VIX," MPRA Paper 46413, University Library of Munich, Germany.
  2. Bao, Qunfang & Li, Shenghong & Gong, Donggeng, 2012. "Pricing VXX option with default risk and positive volatility skew," European Journal of Operational Research, Elsevier, vol. 223(1), pages 246-255.
  3. Lin, Yueh-Neng, 2013. "VIX option pricing and CBOE VIX Term Structure: A new methodology for volatility derivatives valuation," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4432-4446.
  4. Kaeck, Andreas & Alexander, Carol, 2013. "Continuous-time VIX dynamics: On the role of stochastic volatility of volatility," International Review of Financial Analysis, Elsevier, vol. 28(C), pages 46-56.

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