HDLB - Backtesting The Discrete Volatility Model For Trading VXX - A Comparison Of DISVOL Models

Figure 1: Performance overview of different discrete volatility models compared with the best performing simple moving average model as a benchmark

Welcome to the second article of our article series where Andrii and I explore volatility trading strategies! Today, just as in our last piece, we will be working with the historical "family” of volatility forecasting models. This time, the plan is to move away from simplistic calculations we used before and modify the Simple Moving Average model from our previous article (we chose SMA as it demonstrated the best out-of-sample performance). We will

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