
Manipulation in the VIX? (2017) - nanis
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2972979
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nanis
This was posted on SSRN in May '17.

Abstract:

At the settlement time of the VIX Volatility Index, volume spikes on S&P 500
Index (SPX) options, but only in out-of-the-money options that are used to
calculate the VIX, and more so for options with a higher and discontinuous
influence on VIX. We investigate alternative explanations of hedging and
coordinated liquidity trading. Tests including those utilizing differences in
put and call options, open interest around the settlement, and a similar
volatility contract with an entirely different settlement procedure in Europe
are inconsistent with these explanations but consistent with market
manipulation. Large transient deviations in prices demonstrate the importance
of settlement design.

