Forums  > Trading  > VIX - market manipulation ?  
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Total Posts: 1412
Joined: Jun 2004
Posted: 2017-05-25 16:43

Interesting story on BBG yesterday about the possibility of VIX being manipulated via the underlying options (which are much less liquid), didn't see this referenced here but was reminded of it by the thread on STIR futures vs OTC !

Is this a real issue? Will it get fixed by changing to physical settlement (unlikely I think) or by moving to a longer averaging window for the option prices/vols ? Apparently it's not so much of an issue for the VSTOXX for some reason?

If I remember correctly there have been changes to the Gold Fix and to LIBOR to avoid this kind of problem are there any other obvious ones ?

article :


Total Posts: 334
Joined: May 2006
Posted: 2017-05-26 11:17
The main argument against it being hedging flow seems to be that "traders don't seem to be closing out existing positions but instead adding new ones".

Erm, that is how you hedge option books.

"There is a SIX am?" -- Arthur


Total Posts: 33
Joined: Jul 2007
Posted: 2017-06-01 21:42
This topic has been discussed for over a decade. VIX future is a derivative on a portfolio of options. Yes, you can manipulate the print of the settlement price by moving the market in individual options. You can take VIX formula and calculate how much moving a given option by a tick will change the settlement price for VIX. Then you look at the book and estimate how much trading it takes to do so. The calculations I did some (long) time ago showed that one technically could move VIX up by as much as half a vol point, but it's harder to move it down. It's not dissimilar to pushing any underlying around the expiration of a derivative. Do I need to mention that placing orders with the intention of moving the market is illegal and remind what happened to those who manipulated LIBOR settlement prices?

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