Volatility futures Market Making software

S

spriteork

Hello everyone.
I've seen some topics on this forum about "options market-making software" that allows modeling, pricing, and quoting with some off-shelf software.

I'm interested is there any commercial software for pricing, quoting a volatility futures (for example VIX futures or VSTOXX futures) from perspective of MM?
 
you also could use TT or CQG and use their excel plug - ins to model your prices. ORC has been acquired by Itiviti which has been acquired by Broadridge. It's quite expensive for what it is now :)
 
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MrMuppet said:
you also could use TT or CQG and use their excel plug - ins to model your prices. ORC has been acquired by Itivity which has been acquired by Broadridge. It's quite expensive for what it is now :)
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Yes, it's very expensive.
 
US MM - sure you want to be a MM and post markets or do you just want to trade?

Real MM you'll need staff, a compliance team, a clearing relationship, and MM tech that integrates with the exchange. Trading rights and if you want to overlap Vix options you need to become a b/d. Some of this you can rent. Plus BOE and CBOEFE have a lengthy queue for membership.
 
ETJ said:
US MM - sure you want to be a MM and post markets or do you just want to trade?

Real MM you'll need staff, a compliance team, a clearing relationship, and MM tech that integrates with the exchange. Trading rights and if you want to overlap Vix options you need to become a b/d. Some of this you can rent. Plus BOE and CBOEFE have a lengthy queue for membership.
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I want to understand, to see on the demo, how it works. What models and approaches are commonly used in volatility futures, and how it is all hedged and replicated in enterprise trading systems... What functionality and typical User Interface cover it...
 
spriteork said:
I want to understand, to see on the demo, how it works. What models and approaches are commonly used in volatility futures, and how it is all hedged and replicated in enterprise trading systems... What functionality and typical User Interface cover it...
More...
sorry that I have to disappoint you, but these systems do not come with models. They give you connectivity, compliance, risk management, and basic order management.

On top of that you'll get an interface that allows you to either write your own code or connect to your pricer. There may be samples, but those are 100% not used in day to day activities. I've seen some basic stuff like SABR or Heston for options, but nobody uses this stuff anyways, at least not in standard form.

The advantage over retail systems is the auto - spreader/ auto - hedger, meaning that when your quote gets hit, the algo will hedge immediately. Being fast is key here, thus you'll have to co-locate. This stuff is not as easy as downloading Ninjatrader from a website and start clicking.

If you want to learn about VIX - futures pricing and hedging, you'll have to read papers and learn the math. Save yourself the money. Nobody is gonna give you a demo anyways and contracts are usually for at least 3 months
 
MrMuppet said:
sorry that I have to disappoint you, but these systems do not come with models. They give you connectivity, compliance, risk management, and basic order management.

On top of that you'll get an interface that allows you to either write your own code or connect to your pricer. There may be samples, but those are 100% not used in day to day activities. I've seen some basic stuff like SABR or Heston for options, but nobody uses this stuff anyways, at least not in standard form.

The advantage over retail systems is the auto - spreader/ auto - hedger, meaning that when your quote gets hit, the algo will hedge immediately. Being fast is key here, thus you'll have to co-locate. This stuff is not as easy as downloading Ninjatrader from a website and start clicking.

If you want to learn about VIX - futures pricing and hedging, you'll have to read papers and learn the math. Save yourself the money. Nobody is gonna give you a demo anyways and contracts are usually for at least 3 months
More...

Can you recommend some good papers on vix futures
 
traider said:
Can you recommend some good papers on vix futures
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I'm not a big practitioner in pricing vix futures,
through I can suggest that sources
upload_2023-6-28_19-2-48.png

- 2 articles "more than you wanted to know" from JPMorgan and GS guys,
they're fine in explaining the origin of variance swaps, their idea for accurate volatility bets with constant gamma, their easy static replication (cause it's just a portfolio of options with concrete weights...though weights gradually change over time)

- the article about varswap replication (2018) seems to give an initial guidance, ideas, how to approximate the volatility index futures with portfolio of options, it have more approximations in it, different approaches giving different accuracy.

- also I was looking for some ideas of "pricing VIX with ML", I had a hypothesis like I can get historical data, train neural network with inputs like (VIX_INDEX, HV20, HV30, HV50, ATM_IV_30D, ATM_IV_60D, ATM_IV_90D etc) for many many years of daily historical data
and that model will learn how to price VIX futures curve out-of-sample, with some (hope small) error. Though it's only idea, I haven't tried it seriously.

- vix thorough look mostly about ideas how VIX index value can be manipulated, slightly unrelated to pricing

Also a little cheetsheet about different of variance and volatility swaps
https://quant.stackexchange.com/que...milar-to-a-volatility-swap-or-a-variance-swap

I should mention, that it's only theoretical ideas,
I haven't any role in trading firm with real production quant models yet.
 
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