VIX Futures Portfolio Optimization

Objective: The goal of this project is to implement methodology in the “Dynamic VIX term structure allocation strategy” paper to construct a portfolio that dynamically allocates VIX futures contracts, i.e update VIX futures contract weight each day.

Part 1: ⚫ Follow the paper methodology to reproduce the results and charts from the paper. ⚫ As option data is not available, you can use realized volatility (standard deviation) over the last 30 days to calculate ImpliedVol. ⚫ Implement both MV and PMV approaches to update weights daily and reset every quarter. ⚫ Produce a table containing weights for each date. ⚫ Backtest the strategy with historical data and produce the cumulative profit & loss chart.

Part 2: ⚫ Add an additional constraint: daily loss cannot exceed 10%. ⚫ Follow part 1 to optimize the portfolio with this constraint.

Part 3: ⚫ Construct a portfolio with 7 futures contracts (In the paper there are only 5 futures contracts) ⚫ Follow part 1 to optimize the portfolio with this new condition.