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Characteristics of Implied Volatilities of Options on Live-Cattle Futures

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  • Eales, James S.
  • Hauser, Robert J.

Abstract

Implied volatilities as variance forecasts are discussed in terms of expected biases caused by differences between option-valuation theory and practice. An empirical analysis of the 1985 live-cattle options market indicates that the implied volatility was generated by different underlying processes, depending on option type and contract.

Suggested Citation

  • Eales, James S. & Hauser, Robert J., 1986. "Characteristics of Implied Volatilities of Options on Live-Cattle Futures," 1986 Annual Meeting, July 27-30, Reno, Nevada 278459, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea86:278459
    DOI: 10.22004/ag.econ.278459
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    References listed on IDEAS

    as
    1. Schmalensee, Richard & Trippi, Robert R, 1978. "Common Stock Volatility Expectations Implied by Option Premia," Journal of Finance, American Finance Association, vol. 33(1), pages 129-147, March.
    2. Robert C. Merton, 2005. "Theory of rational option pricing," World Scientific Book Chapters, in: Sudipto Bhattacharya & George M Constantinides (ed.), Theory Of Valuation, chapter 8, pages 229-288, World Scientific Publishing Co. Pte. Ltd..
    3. Hauser, Robert J. & Eales, James S., 1985. "On the Measurement of Risks and Returns of Hedging with Options," 1985 Annual Meeting, August 4-7, Ames, Iowa 278561, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    4. Plato, Gerald, 1985. "Valuing American Options on Commodity Futures Contracts," Journal of Agricultural Economics Research, United States Department of Agriculture, Economic Research Service, vol. 37(2), pages 1-14.
    5. 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.
    6. Bruce L. Gardner, 1977. "Commodity Options for Agriculture," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 59(5), pages 986-992.
    7. Black, Fischer, 1976. "The pricing of commodity contracts," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 167-179.
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