Extreme-Strike Comparisons and Structural Bounds for SPX and VIX Options
Author | : Andrew Papanicolaou |
Publisher | : |
Total Pages | : 34 |
Release | : 2018 |
ISBN-10 | : OCLC:1304491822 |
ISBN-13 | : |
Rating | : 4/5 (22 Downloads) |
Download or read book Extreme-Strike Comparisons and Structural Bounds for SPX and VIX Options written by Andrew Papanicolaou and published by . This book was released on 2018 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: This article explores the relationship between the SPX and VIX options markets. High-strike VIX call options are used to hedge tail risk in the SPX, which means that SPX options are a reflection of the extreme-strike asymptotics of VIX options, and vice versa. This relationship can be quantified using moment formulas in a model-free way. Comparisons are made between VIX and SPX implied volatilities along with various examples of stochastic volatility models.