Inferring information from the S&P 500, CBOE VIX, and CBOE SKEW indices

Jiling Cao, Xinfeng Ruan*, Wenjun Zhang

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

15 Citations (Scopus)

Abstract

This paper compares the information extracted from the S&P 500, CBOE VIX, and CBOE SKEW indices for the S&P 500 index option pricing. Based on our empirical analysis, VIX is a very informative index for option prices. Whether adding the SKEW or the VIX term structure can improve the option pricing performance depends on the model we choose. Roughly speaking, the VIX term structure is informative for some models, while the SKEW is very noisy and does not contain much important information for option prices. This paper also extends Zhang et al. (2017, J Futures Markets, 37, 211–237) into three typical affine models.

Original languageEnglish
Pages (from-to)945-973
Number of pages29
JournalJournal of Futures Markets
Volume40
Issue number6
DOIs
Publication statusPublished - 1 Jun 2020
Externally publishedYes

Keywords

  • CBOE SKEW
  • CBOE VIX
  • MCMC
  • SPX
  • affine model
  • option pricing
  • term structure

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