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VIX option‐implied volatility slope and VIX futures returns

Author

Listed:
  • Jungah Yoon
  • Xinfeng Ruan
  • Jin E. Zhang
Abstract
This paper documents the dynamics of the term structure of the implied volatility (IV) smirk of Chicago Board Options Exchange Volatility Index (VIX) options. Empirical analysis shows that VIX option–IV slope predicts VIX futures returns over the next day to month, outperforms existing investors' perception proxies in the stock and option markets. The empirical finding is rationalized through time‐varying correlation between the VIX and volatility of VIX (VVIX), VIX jumps, and investors' net positions in VIX futures market.

Suggested Citation

  • Jungah Yoon & Xinfeng Ruan & Jin E. Zhang, 2022. "VIX option‐implied volatility slope and VIX futures returns," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 42(6), pages 1002-1038, June.
    • Handle: RePEc:wly:jfutmk:v:42:y:2022:i:6:p:1002-1038
    DOI: 10.1002/fut.22317
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    4. Apergis, Nicholas & Mustafa, Ghulam & Malik, Shafaq, 2023. "The role of the COVID-19 pandemic in US market volatility: Evidence from the VIX index," The Quarterly Review of Economics and Finance, Elsevier, vol. 89(C), pages 27-35.

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