This thesis examines the VIX index and financial derivatives linked to it. The VIX
is calculated from option prices on the S&P 500 index and represents the market’s
annualized expectation of U.S. equity-market volatility over the following 30 days.
The thesis introduces the main concepts of volatility and option pricing and
derives the VIX methodology within the framework of model-free implied variance
and variance swaps. It also discusses VIX futures, VIX options, exchange-traded
products, variance swaps, and volatility swaps, together with their uses in hedging,
speculation, and portfolio diversification.
The empirical part analyzes the historical behavior of the VIX index and its
relationship with the S&P 500 index. The results highlight the role of the VIX as
an indicator of expected market volatility and elevated uncertainty during periods
of financial stress.
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