Implicit quantiles and expectiles

Fabio Bellini (), Edit Rroji () and Carlo Sala ()
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Fabio Bellini: University of Milano-Bicocca
Edit Rroji: University of Milano-Bicocca
Carlo Sala: University Ramon Llull, ESADE

Annals of Operations Research, 2022, vol. 313, issue 2, No 7, 733-753

Abstract: Abstract We compute nonparametric and forward-looking option-implied quantile and expectile curves, and we study their properties on a 5-year dataset of weekly options written on the S&P 500 Index. After studying the dynamics of the single curves and their joint behaviour, we investigate the potentiality of these quantities for risk management and forecasting purposes. As an alternative form of variability mesaures, we compute option-implied interquantile and interexpectile differences, that are compared with a weekly VIX-like index. In terms of forecasting power we investigate how different quantities related to the implicit quantile and expectile curves predict future logreturns and future realized variances.

Keywords: Risk-neutral distribution; Weekly options; Quantiles; Expectiles; Risk management; Forecasting (search for similar items in EconPapers)
JEL-codes: G10 G13 G14 G17 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s10479-021-04054-8

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