There is a research paper on SSRN that discusses modeling VIX in a manner similar to the one I described last week. In particular they use Box-Cox transform to "normalize" VIX time series. The authors claim that optimal B-C parameter lambda is -0.4, much different from normal (1) or log-normal (0) value. However, being a devil's advocate I tried comparing forecasting results for (0) vs (-0.4) and did not find one parameter being clearly better than the other.
At this point I have not tried other suggestions from the paper, however I did find some ways to make the model more robust.
Weekly market report
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Many investors are looking at VIX and VSTOXX indexes as a leading indicators of volatility in equity markets, however many are confused by t... -
Wall st delivered a mixed bag of news with VIX, VNKY, and VSTOXX and their underlying markets almost unchanged. VXD - volatility index based...
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