Statistics of VIX & VSTOXX Futures with Applications to Trading Volatility Exchange-Traded Products

We study the dynamics of both VIX and VSOTXX futures and ETNs/ETFs. We find that contrary to classical commodities, futures curves for VIX and VSTOXX exhibit large volatility and skewness, consistent with the absence of... [ view full abstract ]

We study the dynamics of both VIX and VSOTXX futures and ETNs/ETFs. We find that contrary to classical commodities, futures curves for VIX and VSTOXX exhibit large volatility and skewness, consistent with the absence of cash-and-carry arbitrage. The constant-maturity futures (CMF) term-structure can be modeled as a stationary stochastic process in which the most likely state is a contango with a mode the index approximately at 12\% and a long-term futures price at approximately 20\%. We analyze the behavior of ETFs and ETNs based on constant-maturity rolling futures strategies, such as VXX, XIV, VXZ, EVIX and EXIV.