ABSTRACT
The pricing models of VIX can be quite different from those of volatility derivatives. We note that VIX on the maturing date is the square root of the expected integrated variance of S&P 500 index over the next 30 calendar days while the discrete realized volatility on the maturity date in volatility derivative is calculated from the initia- tion date to maturity date. Under the affine model, the square of VIX can be expressed as a linear function of instantaneous variance, so analytic tractability of pricing VIX futures and options can be enhanced. There are two approaches for pricing VIX derivatives. In the consistent model approach, one considers the joint dynamics of the index value process and stochastic volatility and derives the dynamics for VIX. The other approach directly models the dynamics for VIX. Pricing formulas of VIX futures and options under the consistent models and direct models are derived. [149 words]
