VIX futures pricing based on high‐frequency VIX: A hybrid approach combining SVR with parametric models

Abstract

AbstractWe propose a novel hybrid approach for volatility index (VIX) futures pricing by combining support vector regression (SVR) with parametric models. Realized semivariances calculated based on high‐frequency VIX are used to characterize the asymmetric shocks of VIX, and the direct pricing framework of the heterogeneous autoregressive model is extended by incorporating realized semivariances. VIX futures prices are first obtained via parametric models, then the predicted prices and realized semivariances are input into SVR to obtain the final predicted values. Empirical results indicate that the combination of SVR with parametric models significantly improves the pricing ability. This indicates the important information of high‐frequency VIX and the necessity of combining machine learning methods with parametric models to obtain more accurate predictions.