Volatility Forecasting Model-Free Implied Volatility

DOI

10.2991/emcs-15.2015.101How to use a DOI?

Keywords

Model-free; GARCH; Realized volatility; Volatility forecasting; Information content

Abstract

Volatility in the financial market is an important variable, which in asset pricing, investment, risk management and policy-making process plays an important role. Methods for predicting volatility are mainly divided into two categories, one is the historical information method, based on the historical information to predict the future volatility; the other is the implied volatility method, calculating the expectation of the future volatility based on the market price of the option. We propose a model-free implied volatility method to measure the volatility. The model-free implied volatility does not depend on the option pricing model, and extracts information from all the option contracts. We provide empirical evidence from the S&P 500 index option that the model-free implied volatility is more accurate than GARCH model in predicting the future volatility.

Copyright

© 2015, the Authors. Published by Atlantis Press.

Open Access

This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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TY  - CONF
AU  - Jingfei Cheng
AU  - Guibin Lu
PY  - 2015/01
DA  - 2015/01
TI  - Volatility Forecasting Model-Free Implied Volatility
BT  - Proceedings of the International Conference on Education, Management, Commerce and Society
PB  - Atlantis Press
SP  - 490
EP  - 493
SN  - 2352-5398
UR  - https://doi.org/10.2991/emcs-15.2015.101
DO  - 10.2991/emcs-15.2015.101
ID  - Cheng2015/01
ER  -