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Long Memory in VIX Futures Volatility

Huskaj, Bujar LU (2013) In Review of Futures Markets 21(1). p.31-48
Abstract
This study provides empirical evidence for long memory in the volatility process of VIX futures returns and investigates the practical importance of modelling it when calculating Value-at-Risk (VaR) for VIX futures and pricing VIX options. The analysis is performed using the GARCH, APARCH, FIGARCH and FIAPARCH models with the normal and skewed Student-t distributions. The VaR analysis shows that the long memory FIGARCH and FIAPARCH models produce the best out-of-sample VaR forecasts. The options analysis, however, shows that the long memory in the volatility has an insignificant impact on the prices of hypothetical VIX options.
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author
organization
publishing date
type
Contribution to journal
publication status
published
subject
in
Review of Futures Markets
volume
21
issue
1
pages
31 - 48
publisher
Chicago Board of Trade
ISSN
0898-011X
language
English
LU publication?
yes
id
6e40af09-b3d4-40cb-9a21-35826c115593 (old id 4193130)
date added to LUP
2013-12-06 13:07:06
date last changed
2016-04-16 06:37:24
@article{6e40af09-b3d4-40cb-9a21-35826c115593,
  abstract     = {This study provides empirical evidence for long memory in the volatility process of VIX futures returns and investigates the practical importance of modelling it when calculating Value-at-Risk (VaR) for VIX futures and pricing VIX options. The analysis is performed using the GARCH, APARCH, FIGARCH and FIAPARCH models with the normal and skewed Student-t distributions. The VaR analysis shows that the long memory FIGARCH and FIAPARCH models produce the best out-of-sample VaR forecasts. The options analysis, however, shows that the long memory in the volatility has an insignificant impact on the prices of hypothetical VIX options.},
  author       = {Huskaj, Bujar},
  issn         = {0898-011X},
  language     = {eng},
  number       = {1},
  pages        = {31--48},
  publisher    = {Chicago Board of Trade},
  series       = {Review of Futures Markets},
  title        = {Long Memory in VIX Futures Volatility},
  volume       = {21},
  year         = {2013},
}