Backtesting delta-hedged volatility strategies

Discussion in 'Options' started by ajensen, Apr 13, 2017.

  1. spec77

    spec77

    I was suggesting using VIX and SP500 (and similar VIX like index) to backtest, and not to worry about strike specific vol. Of course this is just an approximation.
     
    #11     Apr 18, 2017
  2. sle

    sle

    Oh, I see. You would be better off just using ATM vol and doing simple RV-IV tests then.

    Variance swap includes a fair amount of convexity premium, so it will always come in as expensive on RV/IV basis since the var swap payoff = (realized_vol^2 - var_strike^2)/(2*var_strike).
     
    #12     Apr 18, 2017