Cover -- Contents -- Introduction -- 1 Volatility and Its Estimation -- 1.1 Introduction -- 1.2 Volatility measurement -- 1.2.1 Alternative volatility estimators -- 1.2.2 High-frequency data -- 1.2.3 Concluding remarks -- 1.3 Volatility forecasting -- 1.3.1 Time series analysis -- 1.3.2 Forecasts implied by option prices -- 1.3.3 Concluding remarks -- 1.4 Volatility surface and option pricing -- 1.4.1 Local volatility model -- 1.4.2 Stochastic volatility models -- 1.4.3 Concluding remarks -- 1.5 Conclusions -- 2 Overview of volatility derivatives -- 2.1 Volatility exposure in a delta-hedged option -- 2.2 Variance swaps -- 2.3 VIX and VIX futures -- 2.4 VIX options -- 2.5 The economics of volatility derivatives -- 3 Options Delta Hedging with No Options at All -- 3.1 Introduction -- 3.2 Options as volatility instruments - replicating realized volatility -- 3.3 Volatility arbitrage based on various frequencies of data -- 3.4 Methodology and data -- 3.5 Empirical research -- 3.5.1 S&P 500 index - the most developed market -- 3.5.2 The case for other developed markets (FTSE, NIKKEI225, DAX) -- 3.5.3 The case for emerging markets (WIG20, KOSPI, BOVESPA) -- 3.6 Summary -- 4 Volatility Derivatives in Portfolio Optimization -- 4.1 Introduction -- 4.2 The merits of investing in volatility -- 4.3 Volatility in portfolio optimization -- 4.3.1 Benchmark portfolio -- 4.3.2 Long position in implied volatility -- 4.3.3 Short position in realized volatility -- 4.3.4 A combination of long and short position in volatility -- 4.4 Summary -- 5 Benefits of Using Volatility Futures in Investment Strategies -- 5.1 Introduction -- 5.2 Volatility as a traded asset -- 5.3 Markowitz model - a short review -- 5.4 Black-Littermann model - a short review -- 5.5 Markowitz model - application -- 5.5.1 Data used -- 5.5.2 Simulation -- 5.5.3 Empirical results.

5.6 Black-Litterman model - application -- 5.6.1 Data used -- 5.6.2 Simulation -- 5.6.3 Empirical results -- 5.7 Summary -- 6 Predictive Properties of the Volatility Term Structure -- 6.1 Introduction -- 6.2 Volatility term structure of VIX futures - predictive properties based on regression model -- 6.2.1 Motivation -- 6.2.2 Literature review -- 6.2.3 Methodology and data -- 6.2.4 Results -- 6.2.5 Remarks -- 6.3 Predicting VIX - an investment model approach -- 6.3.1 Motivation -- 6.3.2 Data description -- 6.3.3 Methodology -- 6.3.4 Measures of volatility term structure -- 6.3.5 Forecasting properties of volatility term structure -- 6.3.6 Investment model -- 6.4 Summary -- Conclusions -- List of figures -- List of tables -- Bibliography.