A comparison of implied and realized volatility in the Nordic power forward market

Ole Henrik Birkelund, Erik Haugom, Peter Molnár, Martin Opdal and Sjur Westgaard

Energy Economics, 2015, vol. 48, issue C, 288-294

Abstract: In this paper we study implied and realized volatility for the Nordic power forward market. We create an implied volatility index with a fixed time to maturity. This index is compared to a realized volatility time series calculated from high-frequency data. The results show that the implied volatility has a positive bias against the realized volatility measure indicating that there is a risk premium imposed by option traders. The results are consistent with previous research in other markets.

Keywords: Implied volatility; Realized volatility; Electricity; Forwards; Options (search for similar items in EconPapers)
JEL-codes: G10 G12 G13 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:48:y:2015:i:c:p:288-294

DOI: 10.1016/j.eneco.2014.12.021

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