In this paper, we analyze the usefulness of technical analysis, specifically the widely used moving average trading rule, from an asset allocation perspective. We show that when stock returns are predictable, technical analysis adds value to commonly used allocation rules that invest fixed...

In this paper, we analyze the usefulness of technical analysis, specifically the widely employed moving average trading rule from an asset allocation perspective. We show that, when stock returns are predictable, technical analysis adds value to commonly used allocation rules that invest fixed...

We study an investor’s asset allocation problem with a recursive utility and with tradable volatility that follows a 2-factor stochastic volatility model. Consistent with previous findings under the additive utility, we show that the investor can benefit substantially from volatility trading...

In this paper we analyze CBOE VIX futures price time series data from Mar. 2004 to Feb. 2008. We derive a new pricing framework for VIX futures that is convenient to study variance term structure dynamics. Our main contribution to existing literature is the identification of the number of...

Using no arbitrage principle, we derive a relationship between the drift term of risk-neutral dynamics for instantaneous variance and the term structure of forward variance curve. We show that the forward variance curve can be derived from options market. Based on the variance term structure, we...

VIX futures are exchange-traded contracts on a future volatility index level (VIX) derived from a basket of SPX stock index options. The paper posits a stochastic variance model of VIX time evolution, and develops an expression for VIX futures. Free parameters are estimated from market data over...

We construct a statistical model for term-structure of implied volatilities of currency options based on daily historical data for 13 currency pairs in a 19-month period. We examine the joint evolution of 1 month, 2 month, 3 month, 6 month and 1 year 50-delta options in all the currency pairs....