Emerald Publishing

Table 10

P&L’s of volatility arbitrage strategy

Maturity	Model	MPL	$E [e_{1} / v_{0}]$ (%)	A	G (%)
A. China 50 ETF options
10–90 days	SVI	−0.0019	−12.98	434	46.88
10–90 days	Spline	0.0008	1.94	439	57.86
>90 days	SVI	0.0006	0.33	139	53.24
>90 days	Spline	0.0007	0.43	164	51.83
All	SVI	−0.0013	−9.76	573	48.43
All	Spline	0.0008	1.53	603	56.22
B. CSI 300 index options
10–90 days	SVI	−0.1463	−0.31	584	52.23
10–90 days	Spline	0.9192	1.09	632	50.63
>90 days	SVI	−0.6928	−0.15	269	49.44
>90 days	Spline	0.5453	0.28	714	49.30
All	SVI	−0.3186	−0.26	853	51.35
All	Spline	0.7209	0.66	1,346	49.93
C. Soybean meal futures options
10–90 days	SVI	2.0165	5.05	307	63.19
10–90 days	Spline	2.5306	3.97	316	62.66
91–180 days	SVI	5.1163	9.99	276	65.94
91–180 days	Spline	0.7903	1.70	282	59.22
>180 days	SVI	5.0666	5.71	161	60.25
>180 days	Spline	3.7108	3.42	166	66.27
All	SVI	3.8265	7.03	744	63.58
All	Spline	2.1447	3.02	764	62.17
D. Copper futures options
10–90 days	SVI	19.8712	1.99	306	53.59
10–90 days	Spline	25.5436	3.05	371	59.84
>90 days	SVI	144.3640	16.23	204	65.69
>90 days	Spline	31.3453	4.42	222	51.80
All	SVI	69.6683	7.69	510	58.43
All	Spline	27.7156	3.56	593	56.83

Maturity	Model	MPL	$E [e_{1} / v_{0}]$ (%)	A	G (%)
A. China 50 ETF options
10–90 days	SVI	−0.0019	−12.98	434	46.88
10–90 days	Spline	0.0008	1.94	439	57.86
>90 days	SVI	0.0006	0.33	139	53.24
>90 days	Spline	0.0007	0.43	164	51.83
All	SVI	−0.0013	−9.76	573	48.43
All	Spline	0.0008	1.53	603	56.22
B. CSI 300 index options
10–90 days	SVI	−0.1463	−0.31	584	52.23
10–90 days	Spline	0.9192	1.09	632	50.63
>90 days	SVI	−0.6928	−0.15	269	49.44
>90 days	Spline	0.5453	0.28	714	49.30
All	SVI	−0.3186	−0.26	853	51.35
All	Spline	0.7209	0.66	1,346	49.93
C. Soybean meal futures options
10–90 days	SVI	2.0165	5.05	307	63.19
10–90 days	Spline	2.5306	3.97	316	62.66
91–180 days	SVI	5.1163	9.99	276	65.94
91–180 days	Spline	0.7903	1.70	282	59.22
>180 days	SVI	5.0666	5.71	161	60.25
>180 days	Spline	3.7108	3.42	166	66.27
All	SVI	3.8265	7.03	744	63.58
All	Spline	2.1447	3.02	764	62.17
D. Copper futures options
10–90 days	SVI	19.8712	1.99	306	53.59
10–90 days	Spline	25.5436	3.05	371	59.84
>90 days	SVI	144.3640	16.23	204	65.69
>90 days	Spline	31.3453	4.42	222	51.80
All	SVI	69.6683	7.69	510	58.43
All	Spline	27.7156	3.56	593	56.83

Note(s): SVI: the SSVI model in Gatheral and Jacquier (2014). Spline: 5th-order spline interpolation with one knot at moneyness one. Vol-arb strategy: long/short the option with the market implied volatility most deviated from that of the SVI or spline model among the six options closest to at-the-money. Maturity: in calendar days. MPL: means of arbitrage P&L. $E [e_{1} / v_{0}]$ ⁠: average of $e_{1} / v_{0}$ ⁠, where $e_{1}$ is the day-1 arbitrage P&L and $v_{0}$ is the day-0 option price. A: number of arbitrage days. G (%): percentage of arbitrage days with gains

Source(s): Authors’ own work

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