Proceedings of the International Conference on Education, Management, Commerce and Society

Volatility Forecasting Model-Free Implied Volatility

Authors
Jingfei Cheng, Guibin Lu
Corresponding Author
Jingfei Cheng
Available Online January 2015.
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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Volume Title
Proceedings of the International Conference on Education, Management, Commerce and Society
Series
Advances in Social Science, Education and Humanities Research
Publication Date
January 2015
ISBN
10.2991/emcs-15.2015.101
ISSN
2352-5398
DOI
10.2991/emcs-15.2015.101How to use a DOI?
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/).

Cite this article

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  -