Tail Wags Dog: Intraday Price Discovery in VIX Markets

Nicolas P. B. Bollen, Michael J. O'Neill, Robert E. Whaley*

*Corresponding author for this work

Research output: Contribution to journalArticleResearchpeer-review

Abstract

Beginning with VIX futures in 2004, followed by VIX options in 2006 and VIX ETPs in 2009, the daily open interest in volatility contracts is now in the tens of billions of dollars. Given this growth, it is important to develop a better understanding of price discovery and the supply/demand dynamics in each market. Some of the price relations are linked by arbitrage. Others are not. In particular, the relation between the VIX cash index and the VIX futures is not arbitraged, and we show that, where once VIX changes led VIX futures price changes, the VIX futures now leads. (c) 2016 Wiley Periodicals, Inc. Jrl Fut Mark 37:431-451, 2017

Original languageEnglish
Pages (from-to)431-451
Number of pages21
JournalJournal of Futures Markets
Volume37
Issue number5
DOIs
Publication statusPublished - May 2017

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