-] ] ###### ##### #####Combine the above with SPY. We will invest equally in the above strategy # # # and the SPY. For the SPY we also want to target 10% volatility. ######Use the VIX to adjust allocations to SPY ################################################################## #########Plot this blended portfolio above against the SPY###### ##########How does it perform?###### ######## ] ##### Analyze this statement: ###Volatility is mean-reverting, but it tends to persist. We often stay in low vol regimes # # for a period of time. During these regimes it makes sense to take relatively more risk. reg smf.ols (formula='constant_VIX_ret results reg.fit() results.summary() ~ SPYret', data=df)/n#####We want to add in a long VIX futures component now. #######We will buy VIX futures when the VIX Index<11 or when the basis is <-2 ####### ######Add that into your above strategy and compare your returns/stdev/Sharpe ### to the strategy where we only sell VIX futures. ######### ### #####what is the alpha/beta of the strategy now? ######### ## + Code +Markdown ######We want to target a particular volatility for this strategy ####We will use a trailing 20 day st.dev. to do this. ######Make this adjustment. Calculate the Sharpe ratio. ##########: ####### 10%/n10] ### What would a concern be about our trading strategy? #####Should we restrict our trading strategy based on the VIX Index level? Why or why not? ######Look at how the basis predicts VIX futures returns when VIX < 15 and > 15. ############### Is this surprising? 11] ####Based on what you find above, create a trading strategy where we only sell ####the VIX futures. ###What is the annual return, annual stdev, Sharpe ratio (assume r=8%)? #####What is the alpha/beta of the strategy when we only sell VIX futures? 121 ###Graph the results of the strategy above where we start by investing $100/n[7] ###################Examine whether the change in the VIX Index #######is affected by: *********** prior day's change in VIX ############prior day's SPY return ###########basis the prior day #######basis two days ago you can use returns #######Can we use this information to tell us anything about future volatility? ###Using an average level for the basis, what is the predicted change in the VIX? %%%%%%23Is that meaningful? [8] ################################Now look at VIX futures. ######### #########Does the basis of the prior two days predict futures returns? ##########Using these results, what is a rough estimate of futures returns if basis is at its ave? ###########If the basis is positive, what should we do (buy or sell futures)? ########Negative? 1/n[3] ###constant_VIX represents the average of two futures prices.##### ####constant_VIX_ret is the futures return###### ######## ####basis is the difference between the constant_VIX and the VIX Index#### ####SPYret is the return of the SPY###### བ [4] Δ [5] ##########Preliminary questions: ########### ########1. Is the futures curve normally upward or downward sloping?##### #######2. What is the average constant_VIX futures price?### #######3. What is the average VIX Index price?##### ############################# ###: ##############: #########: ###########

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