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Yes, implied volatilities are not informationally efficient: an empirical estimate using options on interest rate futures contracts

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  • Giulio, Cifarelli

Abstract

The accuracy of volatility forecast estimators has been assessed using daily overlapping and non overlapping observations on two major short-term interest rate futures contracts traded in London. The use of a panelized data set has eliminated some of the drawbacks usually associated with non overlapping data estimation, such as the lack of accuracy due to an insufficient number of observations or the arbitrariness of the choice of tenor. In the same way non stationarity and long memory characteristics of daily overlapping time series are disposed of. Information content estimation in levels associated with the Hansen (1982) variance covariance matrix estimator provides reasonably accurate estimates, broadly similar to the corresponding benchmark panel data ones.

Suggested Citation

  • Giulio, Cifarelli, 2004. "Yes, implied volatilities are not informationally efficient: an empirical estimate using options on interest rate futures contracts," MPRA Paper 28655, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:28655
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    References listed on IDEAS

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    More about this item

    Keywords

    Options; stochastic volatility; panel data analysis;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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