From FTA:
What is the fair value of a Vix future? In truth, it’s actually pretty hard to say.
This is a point FT Alphaville has raised before of course — whilst pondering some other volatility-related issues, like the current elephant in the room that is Vix-related ETNs (arguably tramping about on the supply and demand balance of the Vix curve), and the question of why spot volatility remains so stubbornly low while longer-dated volatility and variance pound higher.
The question of whether volatility is an asset class in its own right also comes into play.
As Theo Casey of Futures and Options World has discussed before, it’s actually impossible to replicate the Vix, making convergence arbitrage rather an impossibility. And as Chris Cole of Artemis Capital Management has reminded us, there’s no denying the fact that Vix futures are and always will be derivatives of derivatives, meaning they’re at least twice removed from any underlying fundamentals....MORE
