Propose a methodology using VIX futures as an investment asset while controlling downside risk.
Build three portfolio insurance (PI) strategies using option-based portfolio insurance (OBPI) and constant proportion portfolio insurance (CPPI) for VIX futures.
The effectiveness of the strategy is tested by historical return simulation of eight subsamples and a full sample for the period of Feb. 2007–Jan. 2015.
It is found that the PI strategy can be a tool for both investment and diversification.