Demonstrate how VIX futures work

Assignment Help Finance Basics

Reference no: EM132183863

Question - Cboe Volatility Index (commonly referred to as VIX) is a measure of volatility published by Chicago Board Options Exchange. It is also commonly known as the fear index, as it measures how volatile the stock price movements are. When times are good and stable, its values are low. But when the market experiences swings, VIX value increases.
A number of derivatives, such as &P 500 VIX Short-Term Futures, were developed, and they are designed to profit on either low or high VIX values.

Investors can supplement their stock portfolio with VIX future and receive reimbursements, if the volatility increases. On the other hand, they can also take the opposite position and profit from stability on the market.

1) Demonstrate how VIX futures work.

2) Critically evaluate how risk can be hedged using VIX futures and, on the other hand, what risks such a strategy can bring.

3) Analyse the reasons why VIX derivative investments are often a target of a public criticism.

Reference no: EM132183863

Questions Cloud

When was the original written-produced : A derivative work is "a work based on or derived from one or more already existing works." When a work is copyrighted (and within the copyright term).

Apply the steps of bubble sort and insertion sort : This is the problem, can someone try to solve it for me and let me know if you run into any issues. This is a practice problem of mine.

Annual taxes on property using the following formula : The county tax office calculates the annual taxes on property using the following formula:

What material you will choose for the minimum cost design : ENGT5258 - Advanced Solid Mechanics - Truss design using Finite element method - What is the minimum diameter that will withstand the 10kN load

Demonstrate how VIX futures work : Demonstrate how VIX futures work. Critically evaluate how risk can be hedged using VIX futures and, on the other hand, what risks such a strategy can bring

Draw an example flowchart that asks for the length : The area of a rectangle is the rectangle's length times its width. Can someone draw an example flowchart that asks for the length and width of two rectangles

Access is an example of a relational dbms : Discuss how this fact impacts both the database designer and the database user, and compare it to a flat-file DBMS.

Differences between a page file and a swap file : Explain the differences between a page file and a swap file. Give an example of both, how they are used and what are the conditions in which they are used.

What internal rate of return will you earn : If instead you hold the bond to maturity, what internal rate of return will you earn on your initial investment in the bond

User Account

All Pages