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# Volatility as an Asset Class

## Obvious Benefits and Hidden Risks

#### Series:

## Juliusz Jabłecki, Ryszard Kokoszczyński, Paweł Sakowski, Robert Ślepaczuk and Piotr Wójcik

Volatility derivatives are an important group of financial instruments and their list is much longer than volatility index futures and options. This book reviews methods used for measurement, estimation and forecasting volatility and presents major classes of volatility derivatives and their possible applications in investment strategies and portfolio optimization. Since volatility is not constant, its term structure and the phenomenon of the volatility risk premium are discussed in view of the permanently instable relation between realized and implied volatility. The study proposes a method to use this information in the process of forecasting future values of volatility.

### Book (EPUB)

- ISBN:
- 978-3-653-97884-1

- Availability:
- Available

- Subjects:

## Prices

CHF** SFr.55.95EURD** €51.95EURA** €51.95EUR* €43.95GBP* £35.95USD* $56.95

Currency depends on your shipping address

- Frankfurt am Main, Berlin, Bern, Bruxelles, New York, Oxford, Wien, 2015. 178 pp., 36 tables, 49 graphs

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- Cover
- Title
- Copyright
- About the author(s)/editor(s)
- About the book
- This eBook can be cited
- Contents
- Introduction
- 1.1 Introduction
- 1.2.1 Alternative volatility estimators
- 1.2.2 High-frequency data
- 1.2.3 Concluding remarks
- 1.3.1 Time series analysis
- 1.3.2 Forecasts implied by option prices
- 1.3.3 Concluding remarks
- 1.4.1 Local volatility model
- 1.4.2 Stochastic volatility models
- 1.4.3 Concluding remarks
- 1.5 Conclusions
- 2.1 Volatility exposure in a delta-hedged option
- 2.2 Variance swaps
- 2.3 VIX and VIX futures
- 2.4 VIX options
- 2.5 The economics of volatility derivatives
- 3.1 Introduction
- 3.2 Options as volatility instruments – replicating realized volatility
- 3.3 Volatility arbitrage based on various frequencies of data
- 3.4 Methodology and data
- 3.5.1 S&P500 index – the most developed market
- 3.5.2 The case for other developed markets (FTSE, NIKKEI225, DAX)
- 3.5.3 The case for emerging markets (WIG20, KOSPI, BOVESPA) ...
- 3.6 Summary
- 4.1 Introduction
- 4.2 The merits of investing in volatility
- 4.3.1 Benchmark portfolio
- 4.3.2 Long position in implied volatility
- 4.3.3 Short position in realized volatility
- 4.3.4 A combination of long and short position in volatility
- 4.4 Summary
- 5.1 Introduction
- 5.2 Volatility as a traded asset
- 5.3 Markowitz model – a short review 101
- 5.4 Black-Littermann model – a short review
- 5.5.1 Data used
- 5.5.2 Simulation
- 5.5.3 Empirical results
- 5.6.1 Data used
- 5.6.2 Simulation
- 5.6.3 Empirical results
- 5.7 Summary
- 6.1 Introduction
- 6.2.1 Motivation
- 6.2.2 Literature review
- 6.2.3 Methodology and data
- 6.2.4 Results
- 6.2.5 Remarks
- 6.3.1 Motivation
- 6.3.2 Data description
- 6.3.3 Methodology
- 6.3.4 Measures of volatility term structure
- 6.3.5 Forecasting properties of volatility term structure
- 6.3.6 Investment model
- 6.4 Summary
- Conclusions
- List of figures
- List of tables
- Bibliography
- Cover
- Title
- Copyright
- About the author(s)/editor(s)
- About the book
- This eBook can be cited
- Contents
- Introduction
- 1.1 Introduction
- 1.2.1 Alternative volatility estimators
- 1.2.2 High-frequency data
- 1.2.3 Concluding remarks
- 1.3.1 Time series analysis
- 1.3.2 Forecasts implied by option prices
- 1.3.3 Concluding remarks
- 1.4.1 Local volatility model
- 1.4.2 Stochastic volatility models
- 1.4.3 Concluding remarks
- 1.5 Conclusions
- 2.1 Volatility exposure in a delta-hedged option
- 2.2 Variance swaps
- 2.3 VIX and VIX futures
- 2.4 VIX options
- 2.5 The economics of volatility derivatives
- 3.1 Introduction
- 3.2 Options as volatility instruments – replicating realized volatility
- 3.3 Volatility arbitrage based on various frequencies of data
- 3.4 Methodology and data
- 3.5.1 S&P500 index – the most developed market
- 3.5.2 The case for other developed markets (FTSE, NIKKEI225, DAX)
- 3.5.3 The case for emerging markets (WIG20, KOSPI, BOVESPA) ...
- 3.6 Summary
- 4.1 Introduction
- 4.2 The merits of investing in volatility
- 4.3.1 Benchmark portfolio
- 4.3.2 Long position in implied volatility
- 4.3.3 Short position in realized volatility
- 4.3.4 A combination of long and short position in volatility
- 4.4 Summary
- 5.1 Introduction
- 5.2 Volatility as a traded asset
- 5.3 Markowitz model – a short review 101
- 5.4 Black-Littermann model – a short review
- 5.5.1 Data used
- 5.5.2 Simulation
- 5.5.3 Empirical results
- 5.6.1 Data used
- 5.6.2 Simulation
- 5.6.3 Empirical results
- 5.7 Summary
- 6.1 Introduction
- 6.2.1 Motivation
- 6.2.2 Literature review
- 6.2.3 Methodology and data
- 6.2.4 Results
- 6.2.5 Remarks
- 6.3.1 Motivation
- 6.3.2 Data description
- 6.3.3 Methodology
- 6.3.4 Measures of volatility term structure
- 6.3.5 Forecasting properties of volatility term structure
- 6.3.6 Investment model
- 6.4 Summary
- Conclusions
- List of figures
- List of tables
- Bibliography

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# About the author(s)/editor(s)

### Chapter

- Subjects:

## Prices

### Chapter Price

CHF** SFr.35.00EURD** €36.00EURA** €36.00EUR* €30.00GBP* £23.00USD* $42.00

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## Extract

Juliusz Jabłecki is assistant professor at the University of Warsaw and economic expert at the Polish central bank.

Ryszard Kokoszczyński is Professor of Economics at the University of Warsaw and Head of Research at the Polish central bank.

Paweł Sakowski is assistant professor at the University of Warsaw.

Robert Ślepaczuk is quantitative fund manager at a private investment company and assistant professor at the University of Warsaw.

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Or login to access all content.- Cover
- Title
- Copyright
- About the author(s)/editor(s)
- About the book
- This eBook can be cited
- Contents
- Introduction
- 1.1 Introduction
- 1.2.1 Alternative volatility estimators
- 1.2.2 High-frequency data
- 1.2.3 Concluding remarks
- 1.3.1 Time series analysis
- 1.3.2 Forecasts implied by option prices
- 1.3.3 Concluding remarks
- 1.4.1 Local volatility model
- 1.4.2 Stochastic volatility models
- 1.4.3 Concluding remarks
- 1.5 Conclusions
- 2.1 Volatility exposure in a delta-hedged option
- 2.2 Variance swaps
- 2.3 VIX and VIX futures
- 2.4 VIX options
- 2.5 The economics of volatility derivatives
- 3.1 Introduction
- 3.2 Options as volatility instruments – replicating realized volatility
- 3.3 Volatility arbitrage based on various frequencies of data
- 3.4 Methodology and data
- 3.5.1 S&P500 index – the most developed market
- 3.5.2 The case for other developed markets (FTSE, NIKKEI225, DAX)
- 3.5.3 The case for emerging markets (WIG20, KOSPI, BOVESPA) ...
- 3.6 Summary
- 4.1 Introduction
- 4.2 The merits of investing in volatility
- 4.3.1 Benchmark portfolio
- 4.3.2 Long position in implied volatility
- 4.3.3 Short position in realized volatility
- 4.3.4 A combination of long and short position in volatility
- 4.4 Summary
- 5.1 Introduction
- 5.2 Volatility as a traded asset
- 5.3 Markowitz model – a short review 101
- 5.4 Black-Littermann model – a short review
- 5.5.1 Data used
- 5.5.2 Simulation
- 5.5.3 Empirical results
- 5.6.1 Data used
- 5.6.2 Simulation
- 5.6.3 Empirical results
- 5.7 Summary
- 6.1 Introduction
- 6.2.1 Motivation
- 6.2.2 Literature review
- 6.2.3 Methodology and data
- 6.2.4 Results
- 6.2.5 Remarks
- 6.3.1 Motivation
- 6.3.2 Data description
- 6.3.3 Methodology
- 6.3.4 Measures of volatility term structure
- 6.3.5 Forecasting properties of volatility term structure
- 6.3.6 Investment model
- 6.4 Summary
- Conclusions
- List of figures
- List of tables
- Bibliography
- Cover
- Title
- Copyright
- About the author(s)/editor(s)
- About the book
- This eBook can be cited
- Contents
- Introduction
- 1.1 Introduction
- 1.2.1 Alternative volatility estimators
- 1.2.2 High-frequency data
- 1.2.3 Concluding remarks
- 1.3.1 Time series analysis
- 1.3.2 Forecasts implied by option prices
- 1.3.3 Concluding remarks
- 1.4.1 Local volatility model
- 1.4.2 Stochastic volatility models
- 1.4.3 Concluding remarks
- 1.5 Conclusions
- 2.1 Volatility exposure in a delta-hedged option
- 2.2 Variance swaps
- 2.3 VIX and VIX futures
- 2.4 VIX options
- 2.5 The economics of volatility derivatives
- 3.1 Introduction
- 3.2 Options as volatility instruments – replicating realized volatility
- 3.3 Volatility arbitrage based on various frequencies of data
- 3.4 Methodology and data
- 3.5.1 S&P500 index – the most developed market
- 3.5.2 The case for other developed markets (FTSE, NIKKEI225, DAX)
- 3.5.3 The case for emerging markets (WIG20, KOSPI, BOVESPA) ...
- 3.6 Summary
- 4.1 Introduction
- 4.2 The merits of investing in volatility
- 4.3.1 Benchmark portfolio
- 4.3.2 Long position in implied volatility
- 4.3.3 Short position in realized volatility
- 4.3.4 A combination of long and short position in volatility
- 4.4 Summary
- 5.1 Introduction
- 5.2 Volatility as a traded asset
- 5.3 Markowitz model – a short review 101
- 5.4 Black-Littermann model – a short review
- 5.5.1 Data used
- 5.5.2 Simulation
- 5.5.3 Empirical results
- 5.6.1 Data used
- 5.6.2 Simulation
- 5.6.3 Empirical results
- 5.7 Summary
- 6.1 Introduction
- 6.2.1 Motivation
- 6.2.2 Literature review
- 6.2.3 Methodology and data
- 6.2.4 Results
- 6.2.5 Remarks
- 6.3.1 Motivation
- 6.3.2 Data description
- 6.3.3 Methodology
- 6.3.4 Measures of volatility term structure
- 6.3.5 Forecasting properties of volatility term structure
- 6.3.6 Investment model
- 6.4 Summary
- Conclusions
- List of figures
- List of tables
- Bibliography