What is the appropriate benchmark for a Long/Short VIX futures strategy?How can one compute the Greeks on VIX FuturesWhat benchmark/index to use for backtesting a portfolio of stock options?What are VIX back-month futures based on?Modelling VIX Futures for risk managementWhy is the VIX futures market usually in a state of contango?Why is the value of the VXX ETN always above short-term VIX futures prices?What is the formula that determines when VIX futures expire?EuroStoxx50: long index and short futuresWhy not just be long VIX and wait for the next volatile period?
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What is the appropriate benchmark for a Long/Short VIX futures strategy?
How can one compute the Greeks on VIX FuturesWhat benchmark/index to use for backtesting a portfolio of stock options?What are VIX back-month futures based on?Modelling VIX Futures for risk managementWhy is the VIX futures market usually in a state of contango?Why is the value of the VXX ETN always above short-term VIX futures prices?What is the formula that determines when VIX futures expire?EuroStoxx50: long index and short futuresWhy not just be long VIX and wait for the next volatile period?
.everyoneloves__top-leaderboard:empty,.everyoneloves__mid-leaderboard:empty,.everyoneloves__bot-mid-leaderboard:empty margin-bottom:0;
$begingroup$
Trying to figure out the benchmark for a L/S Vix futures stragegy, doesn't seem like only long or short Vix futures would be appropriate, any ideas? Thx
volatility futures quant-trading-strategies vix benchmark
asked 8 hours ago
hernanavellahernanavella
2431 silver badge6 bronze badges
$endgroup$
add a comment |
$begingroup$
Trying to figure out the benchmark for a L/S Vix futures stragegy, doesn't seem like only long or short Vix futures would be appropriate, any ideas? Thx
volatility futures quant-trading-strategies vix benchmark
asked 8 hours ago
hernanavellahernanavella
2431 silver badge6 bronze badges
$endgroup$
1
$begingroup$
You should be more precise about the strategy. Long/Short VIX gives rise to vol exposure or it's built in a way it does not? Or else? Otherwise asked this way a benchmark (i.e. a tradable systematic and representative portfolio) is L/S Vix.
$endgroup$
– Vitomir
8 hours ago
1
$begingroup$
@Vitomir It's built in a way that it does not......the split of L/S trades is about 50/50, and it participates in about 30-40% of trading days.
$endgroup$
– hernanavella
8 hours ago
1
$begingroup$
Is your strategy long or short depending on its signal and vol neutral over time? or vol neutral with every trade?
$endgroup$
– amdopt
6 hours ago
1
$begingroup$
@amdopt there's no top down design regarding vol neutrality. I just aggregate the individual signals, it happens to be a similar number of longs vs short. The one thing is that I do adjust the size of longs vs shorts to have the same vol.
$endgroup$
– hernanavella
4 hours ago
$begingroup$
Thanks. I ask because it was unclear and an answer below suggested cash as a benchmark which could have been acceptable if you were always neutral. Given that you aren't, cash is not an appropriate option, IMO. Your OP should expand upon the characteristics of your model a bit.
$endgroup$
– amdopt
4 hours ago
add a comment |
$begingroup$
Trying to figure out the benchmark for a L/S Vix futures stragegy, doesn't seem like only long or short Vix futures would be appropriate, any ideas? Thx
volatility futures quant-trading-strategies vix benchmark
asked 8 hours ago
hernanavellahernanavella
2431 silver badge6 bronze badges
$endgroup$
Trying to figure out the benchmark for a L/S Vix futures stragegy, doesn't seem like only long or short Vix futures would be appropriate, any ideas? Thx
volatility futures quant-trading-strategies vix benchmark
volatility futures quant-trading-strategies vix benchmark
asked 8 hours ago
hernanavellahernanavella
2431 silver badge6 bronze badges
asked 8 hours ago
hernanavellahernanavella
2431 silver badge6 bronze badges
asked 8 hours ago
hernanavellahernanavella
2431 silver badge6 bronze badges
asked 8 hours ago
hernanavellahernanavella
2431 silver badge6 bronze badges
asked 8 hours ago
hernanavellahernanavella
2431 silver badge6 bronze badges
2431 silver badge6 bronze badges
1
$begingroup$
You should be more precise about the strategy. Long/Short VIX gives rise to vol exposure or it's built in a way it does not? Or else? Otherwise asked this way a benchmark (i.e. a tradable systematic and representative portfolio) is L/S Vix.
$endgroup$
– Vitomir
8 hours ago
1
$begingroup$
@Vitomir It's built in a way that it does not......the split of L/S trades is about 50/50, and it participates in about 30-40% of trading days.
$endgroup$
– hernanavella
8 hours ago
1
$begingroup$
Is your strategy long or short depending on its signal and vol neutral over time? or vol neutral with every trade?
$endgroup$
– amdopt
6 hours ago
1
$begingroup$
@amdopt there's no top down design regarding vol neutrality. I just aggregate the individual signals, it happens to be a similar number of longs vs short. The one thing is that I do adjust the size of longs vs shorts to have the same vol.
$endgroup$
– hernanavella
4 hours ago
$begingroup$
Thanks. I ask because it was unclear and an answer below suggested cash as a benchmark which could have been acceptable if you were always neutral. Given that you aren't, cash is not an appropriate option, IMO. Your OP should expand upon the characteristics of your model a bit.
$endgroup$
– amdopt
4 hours ago
add a comment |
1
$begingroup$
You should be more precise about the strategy. Long/Short VIX gives rise to vol exposure or it's built in a way it does not? Or else? Otherwise asked this way a benchmark (i.e. a tradable systematic and representative portfolio) is L/S Vix.
$endgroup$
– Vitomir
8 hours ago
1
$begingroup$
@Vitomir It's built in a way that it does not......the split of L/S trades is about 50/50, and it participates in about 30-40% of trading days.
$endgroup$
– hernanavella
8 hours ago
1
$begingroup$
Is your strategy long or short depending on its signal and vol neutral over time? or vol neutral with every trade?
$endgroup$
– amdopt
6 hours ago
1
$begingroup$
@amdopt there's no top down design regarding vol neutrality. I just aggregate the individual signals, it happens to be a similar number of longs vs short. The one thing is that I do adjust the size of longs vs shorts to have the same vol.
$endgroup$
– hernanavella
4 hours ago
$begingroup$
Thanks. I ask because it was unclear and an answer below suggested cash as a benchmark which could have been acceptable if you were always neutral. Given that you aren't, cash is not an appropriate option, IMO. Your OP should expand upon the characteristics of your model a bit.
$endgroup$
– amdopt
4 hours ago
1
1
$begingroup$
You should be more precise about the strategy. Long/Short VIX gives rise to vol exposure or it's built in a way it does not? Or else? Otherwise asked this way a benchmark (i.e. a tradable systematic and representative portfolio) is L/S Vix.
$endgroup$
– Vitomir
8 hours ago
$begingroup$
You should be more precise about the strategy. Long/Short VIX gives rise to vol exposure or it's built in a way it does not? Or else? Otherwise asked this way a benchmark (i.e. a tradable systematic and representative portfolio) is L/S Vix.
$endgroup$
– Vitomir
8 hours ago
1
1
$begingroup$
@Vitomir It's built in a way that it does not......the split of L/S trades is about 50/50, and it participates in about 30-40% of trading days.
$endgroup$
– hernanavella
8 hours ago
$begingroup$
@Vitomir It's built in a way that it does not......the split of L/S trades is about 50/50, and it participates in about 30-40% of trading days.
$endgroup$
– hernanavella
8 hours ago
1
1
$begingroup$
Is your strategy long or short depending on its signal and vol neutral over time? or vol neutral with every trade?
$endgroup$
– amdopt
6 hours ago
$begingroup$
Is your strategy long or short depending on its signal and vol neutral over time? or vol neutral with every trade?
$endgroup$
– amdopt
6 hours ago
1
1
$begingroup$
@amdopt there's no top down design regarding vol neutrality. I just aggregate the individual signals, it happens to be a similar number of longs vs short. The one thing is that I do adjust the size of longs vs shorts to have the same vol.
$endgroup$
– hernanavella
4 hours ago
$begingroup$
@amdopt there's no top down design regarding vol neutrality. I just aggregate the individual signals, it happens to be a similar number of longs vs short. The one thing is that I do adjust the size of longs vs shorts to have the same vol.
$endgroup$
– hernanavella
4 hours ago
$begingroup$
Thanks. I ask because it was unclear and an answer below suggested cash as a benchmark which could have been acceptable if you were always neutral. Given that you aren't, cash is not an appropriate option, IMO. Your OP should expand upon the characteristics of your model a bit.
$endgroup$
– amdopt
4 hours ago
$begingroup$
Thanks. I ask because it was unclear and an answer below suggested cash as a benchmark which could have been acceptable if you were always neutral. Given that you aren't, cash is not an appropriate option, IMO. Your OP should expand upon the characteristics of your model a bit.
$endgroup$
– amdopt
4 hours ago
add a comment |
3 Answers
3
active
oldest
votes
$begingroup$
You could compare it, over the historical period of interest, to 1000 randomly generated VIX strategies which are:
Flat on 60 Percent of days (randomly chosen days)
Long VIX futures on 20% of days
Short VIX futures on 20% of days
(You would adjust these percentages to the characteristics of your strategy. I guessed these values from your comment).
The rank of your strategy among the 1000 random strategies would give you an idea of the performance of your strategy.
answered 6 hours ago
noob2noob2
4,4691 gold badge11 silver badges20 bronze badges
$endgroup$
$begingroup$
this is a fine I idea for validation. I already do something similar. I was trying to find something accessible (beta if you will) for a third party to compare.
$endgroup$
– hernanavella
4 hours ago
add a comment |
$begingroup$
If your strategy truly has no directional bias, then the benchmark should be cash (ie whatever you would earn using the capital in your trading account and taking no risk).
answered 7 hours ago
Chris TaylorChris Taylor
3,70912 silver badges21 bronze badges
$endgroup$
add a comment |
$begingroup$
If you are developing this strategy to use personally, I would benchmark it against your next best option.
If the strategy has been developed to attempt to manage other peoples money I would benchmark it against the HFRX RV: Volatility Index. This is an index of alternatives that a Vol investor would consider versus investing in your strategy.
From HFRX Indices:
HFRX RV: Volatility Index
Volatility strategies trade volatility as an asset class, employing
arbitrage, directional, market neutral or a mix of types of
strategies, and include exposures which can be long, short, neutral or
variable to the direction of implied volatility, and can include both
listed and unlisted instruments. Directional volatility strategies
maintain exposure to the direction of implied volatility of a
particular asset or, more generally, to the trend of implied
volatility in broader asset classes. Arbitrage strategies employ an
investment process designed to isolate opportunities between the price
of multiple options or instruments containing implicit optionality.
Volatility arbitrage positions typically maintain characteristic
sensitivities to levels of implied and realized volatility, levels of
interest rates and the valuation of the issuer's equity, among other
more general market and idiosyncratic sensitivities. Hedge Fund
Research, Inc. (HFR) utilizes a UCITSIII compliant methodology to
construct the HFRX Hedge Fund Indices. The methodology is based on
defined and predetermined rules and objective criteria to select and
rebalance components to maximize representation of the Hedge Fund
Universe. HFRX Indices utilize state-of-the-art quantitative
techniques and analysis; multi-level screening, cluster analysis,
Monte-Carlo simulations and optimization techniques ensure that each
Index is a pure representation of its corresponding investment focus.
answered 6 hours ago
user89135user89135
415 bronze badges
New contributor
user89135 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
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add a comment |
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3 Answers
3
active
oldest
votes
3 Answers
3
active
oldest
votes
active
oldest
votes
active
oldest
votes
$begingroup$
You could compare it, over the historical period of interest, to 1000 randomly generated VIX strategies which are:
Flat on 60 Percent of days (randomly chosen days)
Long VIX futures on 20% of days
Short VIX futures on 20% of days
(You would adjust these percentages to the characteristics of your strategy. I guessed these values from your comment).
The rank of your strategy among the 1000 random strategies would give you an idea of the performance of your strategy.
answered 6 hours ago
noob2noob2
4,4691 gold badge11 silver badges20 bronze badges
$endgroup$
$begingroup$
this is a fine I idea for validation. I already do something similar. I was trying to find something accessible (beta if you will) for a third party to compare.
$endgroup$
– hernanavella
4 hours ago
add a comment |
$begingroup$
You could compare it, over the historical period of interest, to 1000 randomly generated VIX strategies which are:
Flat on 60 Percent of days (randomly chosen days)
Long VIX futures on 20% of days
Short VIX futures on 20% of days
(You would adjust these percentages to the characteristics of your strategy. I guessed these values from your comment).
The rank of your strategy among the 1000 random strategies would give you an idea of the performance of your strategy.
answered 6 hours ago
noob2noob2
4,4691 gold badge11 silver badges20 bronze badges
$endgroup$
$begingroup$
this is a fine I idea for validation. I already do something similar. I was trying to find something accessible (beta if you will) for a third party to compare.
$endgroup$
– hernanavella
4 hours ago
add a comment |
$begingroup$
You could compare it, over the historical period of interest, to 1000 randomly generated VIX strategies which are:
Flat on 60 Percent of days (randomly chosen days)
Long VIX futures on 20% of days
Short VIX futures on 20% of days
(You would adjust these percentages to the characteristics of your strategy. I guessed these values from your comment).
The rank of your strategy among the 1000 random strategies would give you an idea of the performance of your strategy.
answered 6 hours ago
noob2noob2
4,4691 gold badge11 silver badges20 bronze badges
$endgroup$
You could compare it, over the historical period of interest, to 1000 randomly generated VIX strategies which are:
Flat on 60 Percent of days (randomly chosen days)
Long VIX futures on 20% of days
Short VIX futures on 20% of days
(You would adjust these percentages to the characteristics of your strategy. I guessed these values from your comment).
The rank of your strategy among the 1000 random strategies would give you an idea of the performance of your strategy.
answered 6 hours ago
noob2noob2
4,4691 gold badge11 silver badges20 bronze badges
edited 5 hours ago
answered 6 hours ago
noob2noob2
4,4691 gold badge11 silver badges20 bronze badges
answered 6 hours ago
noob2noob2
4,4691 gold badge11 silver badges20 bronze badges
answered 6 hours ago
noob2noob2
4,4691 gold badge11 silver badges20 bronze badges
4,4691 gold badge11 silver badges20 bronze badges
$begingroup$
this is a fine I idea for validation. I already do something similar. I was trying to find something accessible (beta if you will) for a third party to compare.
$endgroup$
– hernanavella
4 hours ago
add a comment |
$begingroup$
this is a fine I idea for validation. I already do something similar. I was trying to find something accessible (beta if you will) for a third party to compare.
$endgroup$
– hernanavella
4 hours ago
$begingroup$
this is a fine I idea for validation. I already do something similar. I was trying to find something accessible (beta if you will) for a third party to compare.
$endgroup$
– hernanavella
4 hours ago
$begingroup$
this is a fine I idea for validation. I already do something similar. I was trying to find something accessible (beta if you will) for a third party to compare.
$endgroup$
– hernanavella
4 hours ago
add a comment |
$begingroup$
If your strategy truly has no directional bias, then the benchmark should be cash (ie whatever you would earn using the capital in your trading account and taking no risk).
answered 7 hours ago
Chris TaylorChris Taylor
3,70912 silver badges21 bronze badges
$endgroup$
add a comment |
$begingroup$
If your strategy truly has no directional bias, then the benchmark should be cash (ie whatever you would earn using the capital in your trading account and taking no risk).
answered 7 hours ago
Chris TaylorChris Taylor
3,70912 silver badges21 bronze badges
$endgroup$
add a comment |
$begingroup$
If your strategy truly has no directional bias, then the benchmark should be cash (ie whatever you would earn using the capital in your trading account and taking no risk).
answered 7 hours ago
Chris TaylorChris Taylor
3,70912 silver badges21 bronze badges
$endgroup$
If your strategy truly has no directional bias, then the benchmark should be cash (ie whatever you would earn using the capital in your trading account and taking no risk).
answered 7 hours ago
Chris TaylorChris Taylor
3,70912 silver badges21 bronze badges
answered 7 hours ago
Chris TaylorChris Taylor
3,70912 silver badges21 bronze badges
answered 7 hours ago
Chris TaylorChris Taylor
3,70912 silver badges21 bronze badges
answered 7 hours ago
Chris TaylorChris Taylor
3,70912 silver badges21 bronze badges
3,70912 silver badges21 bronze badges
add a comment |
add a comment |
$begingroup$
If you are developing this strategy to use personally, I would benchmark it against your next best option.
If the strategy has been developed to attempt to manage other peoples money I would benchmark it against the HFRX RV: Volatility Index. This is an index of alternatives that a Vol investor would consider versus investing in your strategy.
From HFRX Indices:
HFRX RV: Volatility Index
Volatility strategies trade volatility as an asset class, employing
arbitrage, directional, market neutral or a mix of types of
strategies, and include exposures which can be long, short, neutral or
variable to the direction of implied volatility, and can include both
listed and unlisted instruments. Directional volatility strategies
maintain exposure to the direction of implied volatility of a
particular asset or, more generally, to the trend of implied
volatility in broader asset classes. Arbitrage strategies employ an
investment process designed to isolate opportunities between the price
of multiple options or instruments containing implicit optionality.
Volatility arbitrage positions typically maintain characteristic
sensitivities to levels of implied and realized volatility, levels of
interest rates and the valuation of the issuer's equity, among other
more general market and idiosyncratic sensitivities. Hedge Fund
Research, Inc. (HFR) utilizes a UCITSIII compliant methodology to
construct the HFRX Hedge Fund Indices. The methodology is based on
defined and predetermined rules and objective criteria to select and
rebalance components to maximize representation of the Hedge Fund
Universe. HFRX Indices utilize state-of-the-art quantitative
techniques and analysis; multi-level screening, cluster analysis,
Monte-Carlo simulations and optimization techniques ensure that each
Index is a pure representation of its corresponding investment focus.
answered 6 hours ago
user89135user89135
415 bronze badges
New contributor
user89135 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
$endgroup$
add a comment |
$begingroup$
If you are developing this strategy to use personally, I would benchmark it against your next best option.
If the strategy has been developed to attempt to manage other peoples money I would benchmark it against the HFRX RV: Volatility Index. This is an index of alternatives that a Vol investor would consider versus investing in your strategy.
From HFRX Indices:
HFRX RV: Volatility Index
Volatility strategies trade volatility as an asset class, employing
arbitrage, directional, market neutral or a mix of types of
strategies, and include exposures which can be long, short, neutral or
variable to the direction of implied volatility, and can include both
listed and unlisted instruments. Directional volatility strategies
maintain exposure to the direction of implied volatility of a
particular asset or, more generally, to the trend of implied
volatility in broader asset classes. Arbitrage strategies employ an
investment process designed to isolate opportunities between the price
of multiple options or instruments containing implicit optionality.
Volatility arbitrage positions typically maintain characteristic
sensitivities to levels of implied and realized volatility, levels of
interest rates and the valuation of the issuer's equity, among other
more general market and idiosyncratic sensitivities. Hedge Fund
Research, Inc. (HFR) utilizes a UCITSIII compliant methodology to
construct the HFRX Hedge Fund Indices. The methodology is based on
defined and predetermined rules and objective criteria to select and
rebalance components to maximize representation of the Hedge Fund
Universe. HFRX Indices utilize state-of-the-art quantitative
techniques and analysis; multi-level screening, cluster analysis,
Monte-Carlo simulations and optimization techniques ensure that each
Index is a pure representation of its corresponding investment focus.
answered 6 hours ago
user89135user89135
415 bronze badges
New contributor
user89135 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
$endgroup$
add a comment |
$begingroup$
If you are developing this strategy to use personally, I would benchmark it against your next best option.
If the strategy has been developed to attempt to manage other peoples money I would benchmark it against the HFRX RV: Volatility Index. This is an index of alternatives that a Vol investor would consider versus investing in your strategy.
From HFRX Indices:
HFRX RV: Volatility Index
Volatility strategies trade volatility as an asset class, employing
arbitrage, directional, market neutral or a mix of types of
strategies, and include exposures which can be long, short, neutral or
variable to the direction of implied volatility, and can include both
listed and unlisted instruments. Directional volatility strategies
maintain exposure to the direction of implied volatility of a
particular asset or, more generally, to the trend of implied
volatility in broader asset classes. Arbitrage strategies employ an
investment process designed to isolate opportunities between the price
of multiple options or instruments containing implicit optionality.
Volatility arbitrage positions typically maintain characteristic
sensitivities to levels of implied and realized volatility, levels of
interest rates and the valuation of the issuer's equity, among other
more general market and idiosyncratic sensitivities. Hedge Fund
Research, Inc. (HFR) utilizes a UCITSIII compliant methodology to
construct the HFRX Hedge Fund Indices. The methodology is based on
defined and predetermined rules and objective criteria to select and
rebalance components to maximize representation of the Hedge Fund
Universe. HFRX Indices utilize state-of-the-art quantitative
techniques and analysis; multi-level screening, cluster analysis,
Monte-Carlo simulations and optimization techniques ensure that each
Index is a pure representation of its corresponding investment focus.
answered 6 hours ago
user89135user89135
415 bronze badges
New contributor
user89135 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
$endgroup$
If you are developing this strategy to use personally, I would benchmark it against your next best option.
If the strategy has been developed to attempt to manage other peoples money I would benchmark it against the HFRX RV: Volatility Index. This is an index of alternatives that a Vol investor would consider versus investing in your strategy.
From HFRX Indices:
HFRX RV: Volatility Index
Volatility strategies trade volatility as an asset class, employing
arbitrage, directional, market neutral or a mix of types of
strategies, and include exposures which can be long, short, neutral or
variable to the direction of implied volatility, and can include both
listed and unlisted instruments. Directional volatility strategies
maintain exposure to the direction of implied volatility of a
particular asset or, more generally, to the trend of implied
volatility in broader asset classes. Arbitrage strategies employ an
investment process designed to isolate opportunities between the price
of multiple options or instruments containing implicit optionality.
Volatility arbitrage positions typically maintain characteristic
sensitivities to levels of implied and realized volatility, levels of
interest rates and the valuation of the issuer's equity, among other
more general market and idiosyncratic sensitivities. Hedge Fund
Research, Inc. (HFR) utilizes a UCITSIII compliant methodology to
construct the HFRX Hedge Fund Indices. The methodology is based on
defined and predetermined rules and objective criteria to select and
rebalance components to maximize representation of the Hedge Fund
Universe. HFRX Indices utilize state-of-the-art quantitative
techniques and analysis; multi-level screening, cluster analysis,
Monte-Carlo simulations and optimization techniques ensure that each
Index is a pure representation of its corresponding investment focus.
answered 6 hours ago
user89135user89135
415 bronze badges
New contributor
user89135 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
answered 6 hours ago
user89135user89135
415 bronze badges
New contributor
user89135 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
answered 6 hours ago
user89135user89135
415 bronze badges
answered 6 hours ago
user89135user89135
415 bronze badges
415 bronze badges
New contributor
user89135 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
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1
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You should be more precise about the strategy. Long/Short VIX gives rise to vol exposure or it's built in a way it does not? Or else? Otherwise asked this way a benchmark (i.e. a tradable systematic and representative portfolio) is L/S Vix.
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– Vitomir
8 hours ago
1
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@Vitomir It's built in a way that it does not......the split of L/S trades is about 50/50, and it participates in about 30-40% of trading days.
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– hernanavella
8 hours ago
1
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Is your strategy long or short depending on its signal and vol neutral over time? or vol neutral with every trade?
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– amdopt
6 hours ago
1
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@amdopt there's no top down design regarding vol neutrality. I just aggregate the individual signals, it happens to be a similar number of longs vs short. The one thing is that I do adjust the size of longs vs shorts to have the same vol.
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– hernanavella
4 hours ago
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Thanks. I ask because it was unclear and an answer below suggested cash as a benchmark which could have been acceptable if you were always neutral. Given that you aren't, cash is not an appropriate option, IMO. Your OP should expand upon the characteristics of your model a bit.
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– amdopt
4 hours ago