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Constructing Zero-Beta VIX Portfolios with Dynamic CAPM

Author

Listed:
  • Jiaqi Chen
  • Michael Tindall

Abstract

This paper focuses on actively managed portfolios of VIX derivatives constructed to reduce portfolio correlation with the equity market. We find that the best results are obtained using Kalman filter-based dynamic CAPM. The portfolio construction method is capable of constructing zero-beta portfolios with positive alpha.

Suggested Citation

  • Jiaqi Chen & Michael Tindall, 2014. "Constructing Zero-Beta VIX Portfolios with Dynamic CAPM," Occasional Papers 14-1, Federal Reserve Bank of Dallas.
  • Handle: RePEc:fip:feddop:2014_001
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    File URL: http://www.dallasfed.org/assets/documents/banking/occasional/1401.pdf
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    Keywords

    Kalman filter; VIX features; VIX; dynamic CAPM; zero beta;

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