Consider a stochastic volatility model. As there are two sources of risk and one asset only, this is an incomplete market. One can complete the market by considering a derivative V1 used to hedge the ...
It appears that the log 'returns' of the VIX index have a (negative) correlation to the log 'returns' of e.g. the S&P 500 index. The r-squared is on the order of 0.7. I thought VIX was supposed to ...