Apr 16, 2012
49: How Best to Price Variance and Volatility
Volatility Review: It's funny how it didn't take
long for our prediction of a range-bound VIX to be proven wrong!
The VVIX has been high. Is a tradable VIX of VIX in the works? What
have the NASDAQ and SPX vol of vol six-month averages been?
One-year? Don gives some remarkable numbers. Apple on the move
downwards; some are eager to buy Apple at 600. NASDAQ vol cones,
like most volatility readings, are at historical lows.
Volatility Viewpoint: Today's guests, Thomas
Thorsen and Emil Stamp, are the authors of the master's thesis,
"Pricing of Variance and Volatility Swaps in a Stochastic
Volatility and Jump Framework." The gang discusses pricing models
of OTC variance swaps, the different models the authors created,
and the accuracy of the models for both forecasting realized
volatility, as well as pricing of variance swaps and GARCH models
in real-world applications.
Crystal Ball: Are you still shorting the VIX? Are
higher levels forecasted for the future? Perception versus