Volatilities implied by price changes in the S&P 500 options and futures contracts

Jitka Hilliard () and Wei Li ()

Review of Quantitative Finance and Accounting, 2014, vol. 42, issue 4, 599-626

Abstract: We develop a new volatility measure: the volatility implied by price changes in option contracts and their underlying. We refer to this as price-change implied volatility. We compare moneyness and maturity effects of price-change and implied volatilities, and their performance in delta hedging. We find that delta hedges based on a price-change implied volatility surface outperform hedges based on the traditional implied volatility surface when applied to S&P 500 future options. Copyright Springer Science+Business Media New York 2014

Keywords: Price-change implied volatility; Implied volatility; S&P 500 options and futures contracts; Delta hedging; G13; C61 (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1007/s11156-013-0354-z

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