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This article examines how incorporating a spike process improves the pricing of VIX derivatives by enhancing traditional volatility models.

June 3, 2026

Snapshots of Valuation of VIX Derivatives: Incorporating Larger Spikes in Volatility-of-Volatility Dynamics

Key Points

This article examines how incorporating a spike process improves the pricing of VIX derivatives by enhancing traditional volatility models.
Introduced a rapidly decaying spike process into existing volatility-of-volatility dynamics.
Compared the revised model against benchmark VIX models to determine pricing effectiveness.
The enhanced model showed superior performance in pricing VIX derivatives relative to traditional benchmarks.

Abstract

Quickly apply original, key PMR-published papers with Snapshots—a short article companion that distills PMR research into compressed, digestible takeaways, so you can put the paper’s core ideas to work in your investment process—fast. This Snapshot article is based on research arguing that adding a rapidly decaying spike process to volatility-of-volatility dynamics improves direct VIX derivatives pricing versus benchmark VIX models.

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Derived from original PMR research written by Zheqi Fan, Doojin Ryu, and Yifan Ye using AI and an editor

Snapshots of Valuation of VIX Derivatives: Incorporating Larger Spikes in Volatility-of-Volatility Dynamics

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