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Long Memory in VIX Futures Volatility

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Author

  • Bujar Huskaj

Summary, in English

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.

Publishing year

2013

Language

English

Pages

31-48

Publication/Series

Review of Futures Markets

Volume

21

Issue

1

Document type

Journal article

Publisher

Chicago Board of Trade

Topic

  • Economics

Status

Published

ISBN/ISSN/Other

  • ISSN: 0898-011X