TY - JOUR
T1 - Tail Wags Dog: Intraday Price Discovery in VIX Markets
AU - Bollen, Nicolas P. B.
AU - O'Neill, Michael J.
AU - Whaley, Robert E.
PY - 2017/5
Y1 - 2017/5
N2 - 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.
AB - 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.
UR - http://www.scopus.com/inward/record.url?scp=84982286567&partnerID=8YFLogxK
U2 - 10.1002/fut.21805
DO - 10.1002/fut.21805
M3 - Article
SN - 0270-7314
VL - 37
SP - 431
EP - 451
JO - Journal of Futures Markets
JF - Journal of Futures Markets
IS - 5
ER -