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Joint calibration of VIX and VXX options: does volatility clustering matter?

Lu, Shan (2023) Joint calibration of VIX and VXX options: does volatility clustering matter? The European Journal of Finance, . pp. 1-32. ISSN 1351-847X. E-ISSN 1466-4364. (doi:10.1080/1351847X.2023.2297042) (KAR id:104301)

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This paper studies the effects of volatility clustering on the joint calibration of VIX and VXX options. We find that model which incorporates volatility clustering outperforms other models without this feature in joint calibration of VIX and VXX options both in-sample and out-of-sample; the superiority of the model with volatility clustering is statistically significant. Moreover, the information contained in the VXX options is not fully spanned by the VIX options, as a result, one can achieve better joint pricing performance by employing both VIX and VXX derivatives data when calibrating the model, compared to the case when only VIX data are used in calibration.

Item Type: Article
DOI/Identification number: 10.1080/1351847X.2023.2297042
Uncontrolled keywords: VIX options; VXX options; VIX exchange traded product; Hawkes process
Subjects: H Social Sciences
Divisions: Divisions > Kent Business School - Division > Department of Accounting and Finance
Funders: University of Kent (
Depositing User: Shan Lu
Date Deposited: 15 Dec 2023 08:53 UTC
Last Modified: 07 Feb 2024 15:20 UTC
Resource URI: (The current URI for this page, for reference purposes)

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