PT  - JOURNAL ARTICLE
AU  - Xinglin Yang
AU  - Peng Wang
AU  - Ji Chen
TI  - VIX Futures Pricing with Affine Jump-GARCH Dynamics and Variance-Dependent Pricing Kernels
AID  - 10.3905/jod.2019.1.075
DP  - 2019 Aug 30
TA  - The Journal of Derivatives
PG  - 110--127
VI  - 27
IP  - 1
4099  - https://pm-research.com/content/27/1/110.short
4100  - https://pm-research.com/content/27/1/110.full
AB  - Volatility Index (VIX) futures are among the most actively traded contracts at the Chicago Board Options Exchange, in response to the growing need for protection against volatility risk. The authors develop a new class of discrete-time and closed-form VIX futures pricing models, in which the S&P 500 returns follow the time-varying infinite-activity Normal Inverse Gaussian (NIG) and finite-activity compound Poisson (CP) jump-GARCH models, and which are risk-neutralized by the variance-dependent pricing kernel used by Christoffersen et al. (2013). They estimate these models using several data sets, including the S&P 500 returns, VIX Index, and VIX futures. The empirical results indicate that the time-varying NIG and CP jump-GARCH models significantly outperform the Heston-Nandi (HN) GARCH model in asset returns fitting and VIX futures pricing.TOPICS: Futures and forward contracts, derivatives