Volatility Futures & Options

VHSI Update and Forecast

2013-06-04T04:51:00.001-04:00

VHSI May futures expired on 30th, last week. Unfortunately I was/am very busy with launching a new strategy into production and could not update the blog on time. Also somehow I missed the futures settlement value so I am using index settlement value instead in the Volatility Forecasts Tracker spreadsheet. Over May results were good, with my model providing better forecasts than the market and

VIX, VSTOXX June 2013 Forecasts

2013-05-24T10:09:00.001-04:00

Yesterday all CBOE and Eurex volatility indexes settled - so forecasting results are in, and as always all the forecasts and results are logged in the Volatility Forecasts spreadsheet . The signals were all correct except for GVZ - Gold Volatility Index, which rallied on gold's quite unexpected decline. The technical issues with data solved, and I have forecasts for all CBOE indexes.The

MATLAB Computational Finance Conference, Options data for your iPhone

2013-05-21T19:56:00.001-04:00

A friend just forwarded me the link - MATLAB Computational Finance Conference will take place in two days on Thursday at Marriott Marquis. Paul Willmott and Attilio Meucci are among the speakers, and the presentations side I hope to hear about matlab tools for machine learning and for dealing with big data and big compute issues. If you're going and want to meet up, send me an email! iVerit

VNKY Forecast

2013-05-14T16:52:00.001-04:00

May futures tied to Nikkei Volatility Index expired today, settling at 26.65, slightly higher than futures level month ago, and higher than my forecast. June futures closed at 25.45 and my forecast is for the index to settle at 24.58. Despite increase in the volatility levels, VNKY did not break 30 barrier, and slight decline that the model suggests seems reasonable. Will resume regular blogging

RTSVX June Forecast

2013-05-07T14:09:00.000-04:00

Sorry I have been really busy lately and don't have a lot of free time to provide updates. However one things that keeps me on schedule are futures forecasts that I publish for all available volatility futures in the world. Today futures on Russian VIX - RTSVX index settled at 19.82, closer to my forecast and correct on direction. Front month futures - expiring on the 7th of June 2013 are

VHSI May Forecast

2013-04-30T19:06:00.000-04:00

Contracts tied to volatility of Hong-Kong benchmark HSI index expired today, settling at 15.28, lower than the futures level a month ago, and closer to my forecast of 14.82. For the next expiration I forecast VHSI index to settle at 15.67 vs futures level of 17.85. It seems that the spike in VIX we experienced about two weeks ago in the was just that - a temporary specific (VHSI did not

Expiring Monthly

2013-04-29T10:25:00.000-04:00

I just found out over the weekend: the editors of Expiring Monthly apparently made two back issues available for free download: July 2011 and September 2011. Enjoy!

Visual Quantitative Finance: Interview with Michael Lovelady

2013-04-26T08:48:00.000-04:00

In this blog post I would like to introduce Michael Lovelady, author of Visual Quantitative Finance: A New Look at Option Pricing, Risk Management, and Structured Securities. Q: Please tell us about your background. A: My early educational background was in math and psychology. I think in most of what I have done since, I keep going back to those fields in some way. Starting in the late

VIX,V2X Forecasts May 2013

2013-04-21T20:31:00.001-04:00

Since last month when I made forecasts for all tradable CBOE indexes volatility rose across the board, in some cases dramatically. While my forecasts were for lower settlement prices, they were higher in all cases - VIX by 2.28 points, VSTOXX by 2.76. GVZ - CBOE Gold volatility index based on GLD ETF options almost doubled in volatility. Still the model is on track - the simulated PL - not a

VIX Mean Reversion Or VIX Median Reversion?

2013-04-17T09:53:00.001-04:00

In January 2013 issue of Expiring Monthly Bill Luby wrote an article “Drilling Down on VIX Mean Reversion” where he states: “Before diving headlong into the data, I will go one step further and propose that it is worth challenging the idea of mean reversion in general. It is not that I am challenging the idea of the VIX tending toward a middling value over time, but rather that median reversion

VNKY Wrap-up

2013-04-14T23:56:00.002-04:00

Nikkei Volatility Index April futures expired on Tuesday, settling at 29.55. As I mentioned when I made the forecast, this is the first "buy signal" for the first time this year, and that the economic situation in Japan makes forecasting (actually relying on forecast) difficult. VNKY moved even higher than I forecasted. I am not a macro guy and for explanation of situation in Japan I recommend

Week In Volatility: April 6

2013-04-06T10:59:00.001-04:00

News: VIX Index without a doubt is a dominant volatility instrument, so it is no surprise that CBOE decided to increase trading hours, first by adding separate evening session, then extending morning session to cover entire European trading session. I think this move will actually benefit VSTOXX futures liquidity. Risk magazine writes that we should expect more products providing exposure to

Italian Volatility Index

2013-03-31T20:49:00.002-04:00

Somehow I missed the news, but about a month ago FTSE launched a series of new indexes, among them based on Italian MIB index link, bloomberg quote. The complete list of indexes is available here and is called FTSE Implied Volatility Index Series. Volatility futures in the US declined as equity markets rallied, but VSTOXX and futures rose on European credit risk. SKEW index, and VVIX Index

Excel Big Data & Python in Finance

2013-03-28T16:31:00.003-04:00

For readers in NYC area interested in augmenting their programming skills - there are two day-long workshops that I believe to be of excellent value for quants and traders. Learn a new skill and meet other finance professionals! April 5, 2013, Python in Finance The day-long conference in New York City brings together 300+ Python practitioners with a who’s who line-up of speakers from

VHSI April 2013 Forecast

2013-03-28T09:20:00.000-04:00

This afternoon was the expiration of March VHSI futures. It was an exciting action in the market as in the last half-hour of trading (which average to VHSI settlement value) index rose from 14.87 to 15.26 and tumbled down to close at 14.69. The official settlement value from the exchange is available at day's lag, but according to my calculation should be 15.04, making it almost in between

Leveraged ETFs: How Biased Statistics Affect Your Portfolio

2013-03-26T07:52:00.000-04:00

In this post I would like to introduce Alpay Kaya, author of Leveraged ETFs: How Biased Statistics Affect Your Portfolio OnlyVIX: Before we get to the math, would you tell us about yourself? Alpay Kaya: Like many others, I came to the world of finance from a technical educational background, Control Systems, which is an applied math field mostly populated by electrical & mechanical engineers

Cyprus Reaction: Asia vs Europe

2013-03-24T22:59:00.000-04:00

I do not have to write about credit developments in Cyprus that came out over the last weekend. What followed over the next five days shows an interesting dichotomy between reaction from volatility indexes in Europe and Asia. At the end of preceding week, Thursday 14th and Friday 15th volatility indexes around the world were relatively low. Over the weekend - Monday to Friday all volatility

VIX,VSTOXX Expiration and Forecasts

2013-03-21T09:11:00.000-04:00

Yesterday all CBOE volatility products expired, and also VSTOXX on Eurex. My forecasts did will on Sim PL metric, but statistical error was worse than the market. The most challenging was VSTOXX that rose over the weekend in reaction to credit developments in Europe. I have updated volatility forecasts spreadsheet with the new values. For the next expiration, April 17 2013 my forecasts are:

VIX / VVIX Divergence

2013-03-17T23:06:00.000-04:00

Last week Matt at Distressed Volatility posted a chart showing recent divergence between VIX and VVIX index (volatility index based on VIX options). It looks from the chart that for VIX and VVIX followed similar trajectory but in the recent 3 weeks have gone in starkly different directions - with VIX declining while its implied volatility rising. Looking at the chart the spread seems significant

Nikkei Volatility Index April 2013 Forecast

2013-03-12T20:36:00.000-04:00

Nikkei Volatility Index has been in the uptrend over the last few months while the rest of the world volatility indexes have been in the decline. As I hear the increased volatility worked well for quant-funds trading Japanese equities, but it is a risky currency environment given the rise of USDJPY volatility (although USDJPY skew has declined from its highs. This is my

Week In Volatility

2013-03-10T12:06:00.002-04:00

Volatility News: Equity markets up, volatility indexes down - no need to regurgitate old news, just summarize the stats: VIX fell 2.77 , VSTOXX lost 4.39, VNKY is the only index that has gained 0.13 - I am planning a post analyzing the complete divergence of VNKY from other vol indexes... Speaking of Technical glitch created bad price for Nikkei Volatility Index on Mar 4th Two books coming

RTSVX April 2013 Forecast

2013-03-07T23:20:00.000-05:00

RTSVX - Russian Volatility Index closed on Thursday at 20.31. The value was significantly closer to my forecast of 18.97 than to 25.85 - the futures value at the time of forecast, and also my forecast was correct on the direction capturing a healthy difference of 5.54. However my recent analysis shows that RTSVX is one of the more volatile indexes and one of least predictable, and I am curious

VIX is to SPX as VVIX is to ?

2013-03-06T12:33:00.000-05:00

The answers seems obvious - VIX is the 30-day volatility of SPX, VVIX is the 30-day volatility of VIX, but in reality it is a little more complicated than that, as least when it comes to the difference between historical and implied volatility, or volatility risk premium. After discussing this with one of the readers I decided to make this a short post. VIX measures 30-day implied volatility of

Forecast Volatility with Skew

2013-03-05T09:54:00.000-05:00

I came across a research paper "Corridor Volatility Risk and Expected Returns" the other day. To summarize in one sentence researchers construct volatility indexes using a subsets of SPX options, e.g. call VIX or put VIX, and find that equity risk premium is correlated to call VIX, not put VIX. That gave me an idea to check the same on volatility risk premium - or alternatively figure out a

Poland's Volatility Index

2013-03-03T14:36:00.000-05:00

Index options based on Polish WIG 20 Index started trading in September 2003, and since then the market has matured to the point that one can develop a volatility index. The Warsaw Stock Exchange does not publish an ‘official’ volatility index, so I decided to create one and publish the data. POLAND_VOLATILITY_INDEX.csv in US format (02/28/2013,2452.01,16.36) POLAND_VOLATILITY_INDEX_EUR.csv