On forecasting stock options volatility: evidence from London international financial futures and options exchange

Mircea Asandului ()

Anale. Seria Stiinte Economice. Timisoara, 2012, vol. XVIII, 505-511

Abstract: Options’ volatility forecasting represented, in the last decades, a very interesting and frequent domain of research in financial econometrics due to its importance in option pricing, portfolio selection, risk management and other financial activities. The aim of this study is to realize a comparative analysis of the performances obtained by several forecast models in forecasting stock options volatility. For this, we consider the volatility of the 4 most traded options at Euronext London International Financial Futures and Options Stock Exchange (Euronext.Liffe) in the period 2009-2010. When analyzing and forecasting these stock options we use the period January 2009-May 2011; using this base period, we determine the models that describe better the evolution of the volatility. Based on these models we realize forecasts that are finally compared with the real values recorded in the next 10 trading days. In relation with the differences that appear, we determine the forecast errors and by these we identify the best models and the ones that generate the biggest errors.

Keywords: options; volatility; forecast; EWMA; GARCH class models (search for similar items in EconPapers)
JEL-codes: G17 (search for similar items in EconPapers)
Date: 2012
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