Exchange-traded products (ETPs) linked to futures contracts on the CBOE S&P 500 Volatility Index (VIX) have grown in volume and assets under management in recent years, in part because of their perceived potential to hedge against stock market losses. In this paper we study whether VIX-related...

We find that the leverage factors of leveraged and inverse exchange traded funds can effect the "crookedness"' of volatility smiles. We model leveraged and inverse ETF option prices using partial differential equations (PDEs) and determine closed-form solutions for the option values following...