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Implied and Realized Volatility: A Study of the Ratio Distribution

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  • M. Dashti Moghaddam
  • R. A. Serota

Abstract

We analyze correlations between squared volatility indices, VIX and VXO, and realized variances -- the known one, for the current month, and the predicted one, for the following month. We show that the ratio of the two is best fitted by a Beta Prime distribution, whose shape parameters depend strongly on which of the two months is used.

Suggested Citation

  • M. Dashti Moghaddam & R. A. Serota, 2018. "Implied and Realized Volatility: A Study of the Ratio Distribution," Papers 1810.07735, arXiv.org.
    • Handle: RePEc:arx:papers:1810.07735
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    File URL: http://arxiv.org/pdf/1810.07735
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