Considerable research has been devoted to the study of the VIX futures term structure, showing that the shape of the curve contains valuable information about the future direction of volatility. Trading strategies have been developed based on the informational content of the VIX futures curve.
However, much less attention has been paid to the term structure of spot VIX indices. Reference [1] helps fill this gap by examining the spot VIX term structure, including the VIX, VIX9D, and VIX3M indices. The objective is to determine whether inversions in the spot VIX term structure contain predictive information about future realized volatility.
The author pointed out,
The VIX term structure contains forecasting information about future realised volatility beyond what the VIX level itself implies. I document this in four steps. First, inversion depth has substantial incremental explanatory power above the VIX level, adding between 2.4 and 6.9 percentage points of R-squared in sample. Second, the predictive content is concentrated at the front end of the curve. Measures using the VIX9D index dominate the conventional spot-minus-three-month measure across every robustness check. Third, the signal carries information about the volatility risk premium and is associated with the gap between realised volatility and the VIX at horizons of 5 and 10 days. Fourth, the result survives augmentation with Corsi-style HAR-RV controls and improves out-of-sample forecasts in a recursive 2019 to 2026 test. The Clark-West nested-model statistic rejects equal predictive accuracy at the 1 percent level in every measure-by-horizon cell tested.
In short, the paper concludes,
- The spot VIX term structure contains predictive information about future realized volatility beyond the information embedded in the VIX level alone.
- The predictive power is strongest at the front end of the curve, with VIX9D-based measures consistently outperforming traditional spot-versus-VIX3M measures.
- The signal is related to the volatility risk premium and helps explain the gap between implied and subsequently realized volatility over 5- and 10-day horizons.
- The results remain robust after controlling for realized volatility dynamics and improve out-of-sample volatility forecasts during the 2019–2026 test period.
The findings of this paper are insightful. Notably, the study shows that VIX9D contains the strongest predictive information among the term-structure measures examined. As a result, we will pay more attention to short-dated options and short-term volatility indicators going forward.
Let us know what you think in the comments below or in the discussion forum.
References
[1] Lim Boon Chuan (2026), The Front End of the VIX Term Structure and Forward Realised Volatility, SSRN 6752518
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