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Put simply, VIX is a spot index (fair value to a variance swap on SPX of constant maturity) that you cannot own as a security. Market participants create futures for you to trade. Futures trade higher than the VIX -- if you long VIX futures, you lose when the futures contract converges to VIX. You therefore have a negative roll-down. VIX ETF doesn't avoid ...


To answer your second question, per "Pricing, Hedging and Trading Financial Instruments" by Carol Alexander, the following approaches have been proposed in literature: cubic polynomials (Dumas et al., 1998) piecewise quadratic functions (Beaglehole and Chebanier, 2002) cubic splines (Coleman et al., 1999) hyperbolic trigonometric functions (Brown and ...


The choice of hedging strategy cannot affect the expected p/l, because hedging just consists of doing at-market purchases or sales of the underlying, each of which have zero expected value at the time of transacting.


IV for a put and call is the same so it doesn’t matter (in theory). In practice you use puts for low strikes and calls for high strikes, since the OTM are more liquid. Low/high is relative to the forward price.


I am assuming you are asking this question as a programmer, not as a trader. From a traders perspective, due to put/call parity, we look at puts and calls at the same expiry and strike price as the same thing. Each option has an intrinsic value and a time value. After accounting for the cost of carry, the time value for the put and call are equal as is their ...


There are waaaaayyy better estimators than $Var(log(Close_{t+1}/Close_{t}))$. This close-close estimator is unbiased, and has a data efficiency defined as $1$. The Parkinson estimator uses high and low prices only (useful when you don't trust your open and close prices, or don't have them). It has a data efficiency of about $4$. The expected variance from "...

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