Extreme-Strike Comparisons and Structural Bounds for SPX and VIX Options

Andrew Papanicolaou
University of Sydney
School of Mathematics and Statistics

In this talk I will explore relationships between the SPX and VIX options markets. High-strike VIX call options are used to hedge tail-risk in the SPX, which means that SPX options are sensitive to extreme-strike asymptotics of VIX options. This relationship can be quantified using moment formulas. Formulas for comparisons are presented, along with various examples of stochastic volatility.


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