The popularity of short volatility strategies on the VIX has increased significantly over the past decade. However, the recent increase in volatility of volatility has cannibalized returns associated with these strategies, culminating during the "Volmageddon" of February 5th 2018 when the VIX saw its most significant daily increase ever recorded. The thesis builds upon the methodology of Cheng (2018) by applying ex-ante estimated volatility premiums as a signal in volatility futures strategies in the U.S. and Europe. The findings confirm that trading volatility actively based on premiums embedded in volatility futures significantly improves upon passive volatility strategies and deliver high risk-adjusted
returns, both on the U.S. and European markets. Actively trading volatility not only improves upon performance but also reduces strategy drawdowns. Increasing trading frequency improves strategy performance more on the European than on the U.S. market, despite relatively large transaction costs.
|Uddannelser||Cand.merc.oecon Advanced Economics and Finance, (Kandidatuddannelse) Afsluttende afhandling|