This document concerns the volatility trading as regards investors who seek excess returns by shorting derivatives products in periods of stability. Firstly, we introduce the notion of historical and implied volatility. Secondly, we discuss the use of the S&P 500-based CBOE VIX index, the leading benchmark index to measure the market’s expectation of future volatility. CBOE VIX is also known as the "fear gauge index", because it tends to rise in bearish stock market environments and to fall or remain steady during bullish ones. Next, we discuss the most popular trading strategies based on options, variance swaps and futures. Empirical studies complement the conceptual debate.

A guide on strategies for volatility trading: a conceptual overview

Tibiletti Luisa
;
Giorgini Massimo
2022-01-01

Abstract

This document concerns the volatility trading as regards investors who seek excess returns by shorting derivatives products in periods of stability. Firstly, we introduce the notion of historical and implied volatility. Secondly, we discuss the use of the S&P 500-based CBOE VIX index, the leading benchmark index to measure the market’s expectation of future volatility. CBOE VIX is also known as the "fear gauge index", because it tends to rise in bearish stock market environments and to fall or remain steady during bullish ones. Next, we discuss the most popular trading strategies based on options, variance swaps and futures. Empirical studies complement the conceptual debate.
Novel Research Aspects in Mathematical and Computer Science
Book Publisher International
Mathematical and Computer Science
6
27
56
978-93-5547-598-5
978-93-5547-602-9
https://doi.org/10.9734/bpi/nramcs/v6/2951B
Marketplace volatility, CBOE VIX, Volatility trading
Tibiletti Luisa, Mongioví Gian Marco, Giorgini Massimo
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2318/1866943
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