Question4 1 pts Monitor others vixVIX futures vx Watc CHANGE LAST 13.83 -4.49% 2

Question

Question4 1 pts Monitor others vixVIX futures vx Watc CHANGE LAST 13.83 -4.49% 2.27% -1.25% 1.25% -0.87% -0.84% -0.82% -0.79% -0.52% -0.76% VIX INDEX VX Nov23 16 ocFE ix Dec0716 OCFE 0.65 15.10000.3500 15.7500 -0.2000 VIX Dec21'16 eCFE 15.8000 0.2000 17.1000 0.1500 VIX Feb1517 acFE17.7500 0.1500 18.2000 -0.1500 VIX Apr1917 ecrE 18.7500-0.1500 19.3000 0.1000 19.7000 -0.1500 VIX Jan18'17 ecrt VIX Mar22'17 OCFE VIX Jun21'17 eCFE VIX Jul19'17 OCFE IXX 30.60 -0.69 -2.21% Suppose you sell the Dec. 21 futures. What is approximately the market beta of your short position? (assume that you can treat the December 21 maturity contract as having the beta of a one month (constant) maturity contract).

Explanation / Answer

Return On index Return on Future price from today minus the price from yesterday and divide the answer by the price of yesterday. price from today minus the price from yesterday and divide the answer by the price of yesterday. VIX Index 13.53 -0.65 -4.49% ViX nov23'16 15.1 -0.35 -2.27% 11.60% Beta =         Covariance(return on index,return on future) ViXdec07'16 15.75 -0.2 -1.25% 4.30%               Variance of Reurn on future Vix dec21'16 15.8 -0.2 -1.25% 0.32% vix jan 18'17 17.1 -0.15 -0.87% 8.23% vix feb15'17 17.75 -0.15 -0.84% 3.80% vix mar22'17 18.2 -0.15 -0.82% 2.54% Co variance   = -0.00011       = Covar(D6:D14,E6:E14) vix apr 19'17 18.75 -0.15 -0.79% 3.02% vix jun 21'17 19.3 -0.1 -0.52% 2.93% Variance         = 0.001206         =var(E6:E14) vix jul19'17 19.7 -0.5 -0.76% 2.07% Beta                 = -0.08867         =-0.0001/0.00121 so when selling VIX DEC 21'16 position beta is 1-(-0.0887) Asfuture index has beta is 1 so short position of VIX Dec'21 2016 is 1-(-0.0887)        = 1.088672

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