From model-based to model-free implied volatilities: the VIX index and the new volatility derivatives

Abstract

The aim of the work is to study volatility. It will consider the development of new models and methodologies for the measurement, forecasting and hedging the volatility risk. In particular, it will start from model-based approaches, then considering model-free approaches and volatility indexes. The focus of the work is on the CBOE VIX index, which provides an effective measure of the S&P500 implied volatility. As a further aim, we intend to study investment strategies involving derivatives based on the VIX index. These strategies are constructed both to hedge traditional portfolios and to speculate on the volatility.