The following information relates to Questions 13-16 James Hendrix, a CUNY QC Graduate student, is preparing...
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The following information relates to Questions 13-16 James Hendrix, a CUNY QC Graduate student, is preparing his graduate thesis paper on the topic of market volatility. Perry is particularly interested VIX futures, the so called "fear index," and how equity portfolio managers can benefit from using CBOE's suite of volatility products. Perry notices a sharp uptick in market volatility during the COVID 19 pandemic. As of early April 2023, Perry observes closing VIX futures prices as shown below. Spot VIX Settlement on 8 April 2023 VIX: 41.67 Expiration Date Month VIX 1 14 Apr 23 41.10 2 19 May 23 36.84 3 16 Jun 23 34.54 4 21 Jul 23 32.43 5 18 Aug 23 31.14 6 15 Sep 23 30.37 7 20 Oct 23 30.30 8 17 Nov 23 9 15 Dec23 28.84 28.50 13. Based on the VIX futures quotes shown above, Perry will conclude the VIX term structure is currently best described as in A. Backwardation B. Kinked C. Contango 14. Based on the VIX futures quotes shown above, Hendrix will estimate the roll return from owning VIX futures will be A. Positive B. Negative C. Flat or zero 15. To hedge against a possible sharp downturn in broad U.S. equity prices, Hendrix is most likely to suggest portfolio managers A. Sell VIX futures B. Buy a put option on VIX futures C. Buy VIX futures 16. As part of his research, Hendrix notes that many hedge funds are systematic sellers of volatility using VIX futures and other volatility products such as options. Such strategies are mostly intended to A. Benefit from a fall in company specific risk B. Capture the risk premium embedded in volatility products C. Benefit from a spike in systematic risk The following information relates to Questions 13-16 James Hendrix, a CUNY QC Graduate student, is preparing his graduate thesis paper on the topic of market volatility. Perry is particularly interested VIX futures, the so called "fear index," and how equity portfolio managers can benefit from using CBOE's suite of volatility products. Perry notices a sharp uptick in market volatility during the COVID 19 pandemic. As of early April 2023, Perry observes closing VIX futures prices as shown below. Spot VIX Settlement on 8 April 2023 VIX: 41.67 Expiration Date Month VIX 1 14 Apr 23 41.10 2 19 May 23 36.84 3 16 Jun 23 34.54 4 21 Jul 23 32.43 5 18 Aug 23 31.14 6 15 Sep 23 30.37 7 20 Oct 23 30.30 8 17 Nov 23 9 15 Dec23 28.84 28.50 13. Based on the VIX futures quotes shown above, Perry will conclude the VIX term structure is currently best described as in A. Backwardation B. Kinked C. Contango 14. Based on the VIX futures quotes shown above, Hendrix will estimate the roll return from owning VIX futures will be A. Positive B. Negative C. Flat or zero 15. To hedge against a possible sharp downturn in broad U.S. equity prices, Hendrix is most likely to suggest portfolio managers A. Sell VIX futures B. Buy a put option on VIX futures C. Buy VIX futures 16. As part of his research, Hendrix notes that many hedge funds are systematic sellers of volatility using VIX futures and other volatility products such as options. Such strategies are mostly intended to A. Benefit from a fall in company specific risk B. Capture the risk premium embedded in volatility products C. Benefit from a spike in systematic risk
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