VIX futures pricing with conditional skewness

We develop a closed-form VIX futures valuation formula based on the inverse Gaussian GARCH process by Christoffersen et al. that combines conditional skewness, conditional heteroskedasticity, and a leverage effect. The new model outperforms the benchmark in fitting the S&P 500 returns and the VIX futures prices. The fat-tailed innovation underlying the model substantially reduced pricing errors during the 2008 financial crisis. The in-and out-of-sample pricing performance indicates that the new model should be a default modeling choice for pricing the medium-and long-term VIX futures.