Rights statement: This is the peer reviewed version of the following article: Yao X, Izzeldin M. Forecasting using alternative measures of model-free option-implied volatility. J Futures Markets. 2018;38:199–218. https://doi.org/10.1002/fut.21881 which has been published in final form at http://onlinelibrary.wiley.com/doi/10.1002/fut.21881/abstract This article may be used for non-commercial purposes in accordance With Wiley Terms and Conditions for self-archiving.
Accepted author manuscript, 335 KB, PDF document
Available under license: CC BY-NC: Creative Commons Attribution-NonCommercial 4.0 International License
Final published version
Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
}
TY - JOUR
T1 - Forecasting Using Alternative Measures of Model-Free Option-Implied Volatility
AU - Yao, Xingzhi
AU - Izzeldin, Marwan
N1 - This is the peer reviewed version of the following article: Yao X, Izzeldin M. Forecasting using alternative measures of model-free option-implied volatility. J Futures Markets. 2018;38:199–218. https://doi.org/10.1002/fut.21881 which has been published in final form at http://onlinelibrary.wiley.com/doi/10.1002/fut.21881/abstract This article may be used for non-commercial purposes in accordance With Wiley Terms and Conditions for self-archiving.
PY - 2018/2
Y1 - 2018/2
N2 - This paper evaluates the performance of various measures of model-free implied volatility in predicting returns and realized volatility. The critical role of the out-of-the money call options is highlighted through an investigation of the relevance of different components of the model-free implied volatility. The Monte Carlo simulations show that: first, volatility forecasting performance of various measures can be enhanced by employing an interpolation-extrapolation technique; second, for most measures considered, gains in their predictive power for future returns can be obtained by implementing an interpolation procedure. An empirical application using SPX options recorded from 2003 to 2013 further illustrates these claims.
AB - This paper evaluates the performance of various measures of model-free implied volatility in predicting returns and realized volatility. The critical role of the out-of-the money call options is highlighted through an investigation of the relevance of different components of the model-free implied volatility. The Monte Carlo simulations show that: first, volatility forecasting performance of various measures can be enhanced by employing an interpolation-extrapolation technique; second, for most measures considered, gains in their predictive power for future returns can be obtained by implementing an interpolation procedure. An empirical application using SPX options recorded from 2003 to 2013 further illustrates these claims.
U2 - 10.1002/fut.21881
DO - 10.1002/fut.21881
M3 - Journal article
VL - 38
SP - 199
EP - 218
JO - Journal of Futures Markets
JF - Journal of Futures Markets
SN - 0270-7314
IS - 2
ER -