An analytical formula for VIX futures and its applications

In this paper we present a closed-form, exact solution for the pricing of VIX futures in a stochastic volatility model with simultaneous jumps in both the asset price and volatility processes. The newly-derived formula is then used to show that the well-known convexity correction approximations can sometimes lead to large errors. Utilizing the newly-derived formula, we also conduct an empirical study, the results of which demonstrate that the He-ston stochastic volatility model is a good candidate for the pricing of VIX futures. While incorporating jumps into the underlying price can further improve the pricing of VIX fu-tures, adding jumps to the volatility process appears to contribute little improvement for pricing VIX futures