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Implied and realized volatility: empirical model selection



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Suggested Citation

  • Lan Zhang, 2012. "Implied and realized volatility: empirical model selection," Annals of Finance, Springer, vol. 8(2), pages 259-275, May.
  • Handle: RePEc:kap:annfin:v:8:y:2012:i:2:p:259-275 DOI: 10.1007/s10436-010-0168-0

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    References listed on IDEAS

    1. Andersen T. G & Bollerslev T. & Diebold F. X & Labys P., 2001. "The Distribution of Realized Exchange Rate Volatility," Journal of the American Statistical Association, American Statistical Association, vol. 96, pages 42-55, March.
    2. Robert C. Merton, 2005. "Theory of rational option pricing," World Scientific Book Chapters,in: Theory Of Valuation, chapter 8, pages 229-288 World Scientific Publishing Co. Pte. Ltd..
    3. Jorion, Philippe, 1995. " Predicting Volatility in the Foreign Exchange Market," Journal of Finance, American Finance Association, vol. 50(2), pages 507-528, June.
    4. Per A. Mykland & Lan Zhang, 2009. "Inference for Continuous Semimartingales Observed at High Frequency," Econometrica, Econometric Society, vol. 77(5), pages 1403-1445, September.
    5. Ole E. Barndorff-Nielsen & Shephard, 2002. "Econometric analysis of realized volatility and its use in estimating stochastic volatility models," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 64(2), pages 253-280.
    6. Louis O. Scott, 1992. "The Information Content of Prices in Derivative Security Markets," IMF Staff Papers, Palgrave Macmillan, vol. 39(3), pages 596-625, September.
    7. Roger W. Lee, 2004. "The Moment Formula For Implied Volatility At Extreme Strikes," Mathematical Finance, Wiley Blackwell, vol. 14(3), pages 469-480.
    8. Peter Carr & Hélyette Geman & Dilip Madan & Marc Yor, 2005. "Pricing options on realized variance," Finance and Stochastics, Springer, vol. 9(4), pages 453-475, October.
    9. Torben G. Andersen & Tim Bollerslev & Francis X. Diebold & Paul Labys, 2003. "Modeling and Forecasting Realized Volatility," Econometrica, Econometric Society, vol. 71(2), pages 579-625, March.
    10. Engle, Robert F. & Mustafa, Chowdhury, 1992. "Implied ARCH models from options prices," Journal of Econometrics, Elsevier, vol. 52(1-2), pages 289-311.
    11. Foster, Dean P & Nelson, Daniel B, 1996. "Continuous Record Asymptotics for Rolling Sample Variance Estimators," Econometrica, Econometric Society, vol. 64(1), pages 139-174, January.
    12. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
    13. Lamoureux, Christopher G & Lastrapes, William D, 1993. "Forecasting Stock-Return Variance: Toward an Understanding of Stochastic Implied Volatilities," Review of Financial Studies, Society for Financial Studies, vol. 6(2), pages 293-326.
    14. Beckers, Stan, 1981. "Standard deviations implied in option prices as predictors of future stock price variability," Journal of Banking & Finance, Elsevier, vol. 5(3), pages 363-381, September.
    15. Avi Bick, 1995. "Quadratic-Variation-Based Dynamic Strategies," Management Science, INFORMS, vol. 41(4), pages 722-732, April.
    16. Rubinstein, Mark, 1994. " Implied Binomial Trees," Journal of Finance, American Finance Association, vol. 49(3), pages 771-818, July.
    17. Mark Rubinstein., 1994. "Implied Binomial Trees," Research Program in Finance Working Papers RPF-232, University of California at Berkeley.
    18. Sheikh, Aamir M, 1993. "The Behavior of Volatility Expectations and Their Effects on Expected Returns," The Journal of Business, University of Chicago Press, vol. 66(1), pages 93-116, January.
    19. Amin, Kaushik I & Ng, Victor K, 1997. "Inferring Future Volatility from the Information in Implied Volatility in Eurodollar Options: A New Approach," Review of Financial Studies, Society for Financial Studies, vol. 10(2), pages 333-367.
    20. Pena, Ignacio & Rubio, Gonzalo & Serna, Gregorio, 1999. "Why do we smile? On the determinants of the implied volatility function," Journal of Banking & Finance, Elsevier, vol. 23(8), pages 1151-1179, August.
    21. Ole E. Barndorff-Nielsen & Neil Shephard, 2001. "Non-Gaussian Ornstein-Uhlenbeck-based models and some of their uses in financial economics," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 63(2), pages 167-241.
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    Cited by:

    1. Geon Ho Choe & Kyungsub Lee, 2013. "High moment variations and their application," Papers 1311.4973,
    2. KALNINA, Ilze, 2015. "Inference for nonparametric high-frequency estimators with an application to time variation in betas," Cahiers de recherche 2015-08, Universite de Montreal, Departement de sciences economiques.
    3. Yoann Potiron & Per Mykland, 2016. "Local Parametric Estimation in High Frequency Data," Papers 1603.05700,, revised Mar 2017.
    4. Mykland, Per A. & Zhang, Lan, 2016. "Between data cleaning and inference: Pre-averaging and robust estimators of the efficient price," Journal of Econometrics, Elsevier, vol. 194(2), pages 242-262.

    More about this item


    Cross validation; Discrete observation; F-testing; Implied volatility; Itô process; Leverage effect; Model selection; Realized volatility; C02; C13; C14; C22; D52; D81; G11; G13;

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing


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