Discussion Paper

Constructing Zero-Beta VIX Portfolios with Dynamic CAPM

Abstract: This paper focuses on actively managed portfolios of VIX derivatives constructed to reduce portfolio correlation with the equity market. We find that the best results are obtained using Kalman filter-based dynamic CAPM. The portfolio construction method is capable of constructing zero-beta portfolios with positive alpha.

Keywords: Kalman filter; VIX features; VIX; dynamic CAPM; zero beta;

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Bibliographic Information

Provider: Federal Reserve Bank of Dallas

Part of Series: Occasional Papers

Publication Date: 2014-06-01

Number: 14-1