By analyzing the characteristics of Cboe's volatility-of-volatility (vol-of-vol) index (VVIX), this study reveals that most but not all stylized facts of volatility are also applicable to the vol-of-vol. The VVIX exhibits robust mean reversion, distinct jumps in both directions, an asymmetric relationship with the S&P500 index, weak day-of-the-week effect, and fast incorporation of new market information. Surprisingly, results indicate a significant upward trend in its level that stems partly from a higher variation of the VIX and a higher vol-of-vol risk premium. An increased and robust correlation with the VIX matches the evolution of the VIX options market till 2013.
|Finance Research Letters
|Published - Jul 2023
DFG Classification of Subject Areas according to Review Boards
Subject groups, research areas, subject areas according to Destatis
ASJC Scopus subject areas
- Implied volatility, Stylized facts, VIX, VVIX, Volatility-of-volatility, Vix, Vvix