The Term Structure of Implied Forward Volatility: Recovery and Informational Content in the Corn Options Market
Thorsten M. Egelkraut,
Philip Garcia and
Bruce Sherrick ()
American Journal of Agricultural Economics, 2007, vol. 89, issue 1, 1-11
Using a flexible method, we develop the term structure of volatility implied by corn futures options with differing maturities, and evaluate its ability to predict subsequent realized price volatility. The implied forward volatilities anticipate realized volatility well. For the nearby interval, the implied forward volatilities provide unbiased forecasts, and are superior to forecasts based on historical volatilities. For more distant intervals, early-year options predict the direction and magnitude of future volatility changes about as well as a three-year moving average and better than a naïve forecast. However, later-year options display less forecast power in part due to reduced trading activity. Copyright 2007, Oxford University Press.
References: Add references at CitEc
Citations: View citations in EconPapers (16) Track citations by RSS feed
Downloads: (external link)
Access to full text is restricted to subscribers.
Working Paper: THE TERM STRUCTURE OF IMPLIED FORWARD VOLATILITY: RECOVERY AND INFORMATIONAL CONTENT IN THE CORN OPTIONS MARKET (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:oup:ajagec:v:89:y:2007:i:1:p:1-11
Access Statistics for this article
American Journal of Agricultural Economics is currently edited by Madhu Khanna, Brian E. Roe, James Vercammen and JunJie Wu
More articles in American Journal of Agricultural Economics from Agricultural and Applied Economics Association Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().