Validation Note · #372649 · Volatility
The VIX-ETN vol-premium claim survives clean data
Carlo Zarattini, Andrew Aziz & Antonio Mele · Swiss Finance Institute
validated
1.00→1.03
claimed → measured Sharpe
| Claimed | Measured | Δ | |
|---|---|---|---|
| Sharpe (daily) | 1.00 | 1.03 | +0.03 |
| CAGR | 16.3% | 16.9% | +0.6pp |
| Max drawdown | −31% | −30.9% | +0.1pp |
| Monthly, tail-aware | — | 0.87 | — |
✓Replicate✓Honesty✓Deflate▲Crisis—Generalise✓Frictions▲Decay✓Originality
What the paper claims
A dual signal, the expected volatility risk premium and the VIX term-structure slope, sets long-vol / short-vol / cash in short-term VIX-futures ETNs, sized at VIX/100. Claimed: Sharpe 1.00, CAGR 16.3%, max drawdown −31%, 2008–2025 at 5 bps.
What we measured
Re-implemented end to end on the S&P VIX Short-Term Futures Index reconstructed from public CBOE settlements. All four rule sets match. Net daily Sharpe 1.02 with the ETN fee the paper omits, honest monthly 0.87 — and the edge survives BHY multiple testing and the Deflated Sharpe.
Why the verdict
Every gate clears. The premium is real after costs (breakeven ≈ 40 bps against ~5 real), statistically significant on non-overlapping months, and uncorrelated with equities (β 0.11, α t = 3.3).
Threats to validity
- The paper: a 2025 publication has no true post-publication out-of-sample yet, and recent years hint at premium compression (2024 +2%).
- Our validation: we trade the reconstructed index at settlement NAV, not the paper's Norgate ETN series — validated within ~2pp a year and exact through Volmageddon.
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