Advanced Search
MyIDEAS: Login to save this article or follow this journal

The Economic Value Of Using Realized Volatility In Forecasting Future Implied Volatility

Contents:

Author Info

  • Wing Hong Chan
  • Ranjini Jha
  • Madhu Kalimipalli

Abstract

Abstract We examine the economic benefits of using realized volatility to forecast future implied volatility for pricing, trading, and hedging in the S&P 500 index options market. We propose an encompassing regression approach to forecast future implied volatility, and hence future option prices, by combining historical realized volatility and current implied volatility. Although the use of realized volatility results in superior performance in the encompassing regressions and out-of-sample option pricing tests, we do not find any significant economic gains in option trading and hedging strategies in the presence of transaction costs. Copyright (c) 2009 The Southern Finance Association and the Southwestern Finance Association.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1475-6803.2009.01249.x
File Function: link to full text
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Southern Finance Association & Southwestern Finance Association in its journal Journal of Financial Research.

Volume (Year): 32 (2009)
Issue (Month): 3 ()
Pages: 231-259

as in new window
Handle: RePEc:bla:jfnres:v:32:y:2009:i:3:p:231-259

Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0270-2592
More information through EDIRC

Email:
Web page: http://www.southwesternfinance.org/
More information through EDIRC

Order Information:
Web: http://www.blackwellpublishing.com/subs.asp?ref=0270-2592

Related research

Keywords:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Camille Cornand & Céline Gimet, 2012. "The 2007-2008 financial crisis: Is there evidence of disaster myopia?," Post-Print, HAL halshs-00617127, HAL.
  2. Josifidis, Kosta & Allegret, Jean-Pierre & Gimet, Céline & Pucar, Emilija Beker, 2014. "Macroeconomic policy responses to financial crises in emerging European economies," Economic Modelling, Elsevier, Elsevier, vol. 36(C), pages 577-591.
  3. Camille Cornand & Céline Gimet, 2011. "The 2007-2008 financial crisis : Is there evidence of disaster myopia ?," Working Papers, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure 1125, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bla:jfnres:v:32:y:2009:i:3:p:231-259. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.