scholarly journals The Role of Implied Volatility in Forecasting Future Realized Volatility and Jumps in Foreign Exchange, Stock, and Bond Markets

2007 ◽  
Author(s):  
Thomas Busch ◽  
Bent Jesper Christensen ◽  
Morten Ørregaard Nielsen
Keyword(s):  
Foreign Exchange ◽  
Implied Volatility ◽  
Realized Volatility ◽  
Bond Markets ◽  
Future Realized Volatility

scholarly journals Predictability of OTC Option Volatility for Future Stock Volatility

2020 ◽  
Vol 12 (12) ◽  
pp. 5200
Author(s):  
Jungmu Kim ◽  
Yuen Jung Park
Keyword(s):  
Information Content ◽  
Unbiased Estimator ◽  
Implied Volatility ◽  
Realized Volatility ◽  
Stock Index ◽  
Options Market ◽  
Over The Counter ◽  
Index Options ◽  
Stock Volatility ◽  
Future Realized Volatility

This study explores the information content of the implied volatility inferred from stock index options in the over-the-counter (OTC) market, which has rarely been studied in the literature. Using OTC calls, puts, and straddles on the KOSPI 200 index, we find that implied volatility generally outperforms historical volatility in predicting future realized volatility, although it is not an unbiased estimator. The results are more apparent for options with shorter maturity. However, while implied volatility has strong predictability during normal periods, historical volatility is superior to implied volatility during a period of crisis due to the liquidity contraction of the OTC options market. This finding suggests that the OTC options market can play a role in conveying important information to predict future volatility.

scholarly journals A Sharpe-ratio-based measure for currencies

2015 ◽  
Vol 4 (1) ◽  
pp. 67 ◽  
Author(s):  
Javier Prado-Dominguez ◽  
Carlos Fernández-Herráiz
Keyword(s):  
Random Walk ◽  
Implied Volatility ◽  
Realized Volatility ◽  
Sharpe Ratio ◽  
Excess Return ◽  
Ex Ante ◽  
Market Expectations ◽  
Future Realized Volatility

The Sharpe Ratio offers an excellent summary of the excess return required per unit of risk invested. This work presents an adaptation of the ex-ante Sharpe Ratio for currencies where we consider a random walk approach for the currency behavior and implied volatility as a proxy for market expectations of future realized volatility. The outcome of the proposed measure seems to gauge some information on the expected required return attached to the “peso problem”.

Volatility Forecasting Using Financial Statement Information

2015 ◽  
Vol 90 (5) ◽  
pp. 2079-2106 ◽  
Author(s):  
Suhas A. Sridharan
Keyword(s):  
Implied Volatility ◽  
Abnormal Returns ◽  
Analytical Framework ◽  
Realized Volatility ◽  
Financial Statement ◽  
Forecast Errors ◽  
Main Hypothesis ◽  
Fundamental Information ◽  
Variance Risk ◽  
Future Realized Volatility

ABSTRACT This paper examines whether financial statement information can predict future realized equity volatility incremental to market-based equity volatility forecasts. I use an analytical framework to identify accounting-based drivers of realized volatility. My main hypothesis is that accounting-based drivers can be used to forecast future realized volatility incremental to either past realized volatility or option-implied volatility. I confirm this empirically and document abnormal returns to an option-based trading strategy that takes a long (short) position in firms with financial statement information indicative of high (low) future realized volatility. These results suggest that accounting-based volatility drivers may serve as useful indicators of variance risk. Finally, I demonstrate that the incorporation of accounting-based fundamental information into forecasting models yields lower forecast errors relative to models based solely on past realized volatility.

scholarly journals The magic of an Allaisian appraisal: implied and historical volatility revisited the VIX: once bitten, twice shy?

2017 ◽  
Vol 1 (1) ◽  
pp. 63-74
Author(s):  
Bertrand MUNIER ◽  
Eric BARTHALON ◽  
Séverine MENGUY
Keyword(s):  
Implied Volatility ◽  
Rational Expectation ◽  
Efficient Market Hypothesis ◽  
Realized Volatility ◽  
Monetary Theory ◽  
Option Prices ◽  
Lost Work ◽  
Past Data ◽  
Larger Sample ◽  
Future Realized Volatility

Many contributions have dealt with the relation between implied and historical volatility in reference to the S&P100 index and on mostly limited samples of data. A large part of this literature finds that implied volatility defined directly from option prices is a biased estimator of future realized volatility, although some dissent has been expressed Christensen and Prabhala (1998). We investigate the issue on the larger market of the S&P500, using the VIX index as the measure of implied volatility and on a much larger sample (314 months), extending from January 1990 to December 2016. Our results are in line with most of the literature inasmuch as they invalidate the efficient market hypothesis. More originally, however, we use a time series analysis derived from Maurice Allais’s “lost” work on monetary theory and show that the VIX incorporates a subtle version of perceived and memorized past data – the “missing link” in relating implied to realized volatility - rather than reflecting any kind of “rational expectation” of future realized volatility. Incidentally, we show that the VIX seems to have been over-valued until the middle of the first decade of our century and to be since then averagely under-valued. Amazingly enough, this trend of affairs seems to be steadily confirmed by the financial market, which calls for additional research, even if we offer two possible explanations.

Economic Growth: New Problems and New Risks

2006 ◽  
pp. 20-37 ◽  
Author(s):  
M. Ershov
Keyword(s):  
Economic Growth ◽  
Foreign Exchange ◽  
Driving Force ◽  
Structural Changes ◽  
Rate Of Growth

The economic growth, which is underway in Russia, raises new questions to be addressed. How to improve the quality of growth, increasing the role of new competitive sectors and transforming them into the driving force of growth? How can progressive structural changes be implemented without hampering the rate of growth in general? What are the main external and internal risks, which may undermine positive trends of development? The author looks upon financial, monetary and foreign exchange aspects of the problem and comes up with some suggestions on how to make growth more competitive and sustainable.

The Role of Speculation in French Foreign-Exchange Crises

1953 ◽  
Vol 61 (3) ◽  
pp. 209-220
Author(s):  
Harry C. Eastman
Keyword(s):  
Foreign Exchange
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