The predictive power of the implied volatility of options traded OTC and on exchanges

Wayne W. Yu, Evans C.K. Lui and Jacqueline W. Wang

Journal of Banking & Finance, 2010, vol. 34, issue 1, 1-11

Abstract: This paper investigates the efficiency of stock index options traded over-the-counter (OTC) and on the exchanges in Hong Kong and Japan. Our findings suggest that implied volatility is superior to either historical volatility or a GARCH-type volatility forecast in predicting future volatility in both the OTC and exchange markets. This paper is also one of the first to compare the predictive power of the implied volatility of stock index options traded OTC to that of exchange-traded stock index options. Our evidence suggests that the OTC market is more efficient than the exchanges in Japan, but that the opposite is true in Hong Kong.

Keywords: Implied; volatility; Predictive; power; Historical; volatility; Index; options; Over-the-counter (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (37)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378-4266(09)00152-6
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:34:y:2010:i:1:p:1-11

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().