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BeVIXed: Trading Fear in the Volatility Complex

Author

Listed:
  • Chakravarthy Varadarajan

    (Department of Physics, School of Natural Sciences, University of Manchester, Manchester M13 9PL, UK)

  • Klaus R. Schenk-Hoppé

    (Department of Economics, School of Social Sciences, University of Manchester, Manchester M13 9PL, UK
    Department of Finance, NHH–Norwegian School of Economics, 5045 Bergen, Norway)

Abstract

We explain the evolution of the volatility market and present the infamous day of ‘Volmageddon’ as an insightful case study. Our survey focuses on the pricing and trading of volatility-linked assets, highlighting the impact of mechanical hedging in markets for futures and higher-order derivatives. We supplement the vast statistical analysis of volatility derivatives with a financial economist’s perspective.

Suggested Citation

  • Chakravarthy Varadarajan & Klaus R. Schenk-Hoppé, 2023. "BeVIXed: Trading Fear in the Volatility Complex," Risks, MDPI, vol. 11(5), pages 1-18, May.
    • Handle: RePEc:gam:jrisks:v:11:y:2023:i:5:p:86-:d:1139170
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