Registered: Jun 2011
03-21-12 10:37 AM
Quote from sle:
(4) My preference in VIX is to play risk-neutral spreads (actually, in general I preferr beta-neutral trades, I am a p**** like that). I've found that the best way to find these weights is simple linear regression, even though Barcap research people swear by PCA weights.
I found the quoted suggestment very interesting.
Would you mind explaining it more deeply?
1. What do you mean with «beta-neutral»?
2. What's the endogenous and what's the exogenous variables in you OLS linear regression model?
According to what I understood, I suppose you sell the short term futures and buy the long term one in a proportion dictated by the OLS weights; is it correct?
Thank you so much
Then I would attach the Barclays' paper: what do you think about calibrating the short-long weights according to VXV/VIX ratio, as shown on page 26?