Are there gains from using information over the surface of implied volatilities?
Biao Guo,
Qian Han and
Hai Lin
Journal of Futures Markets, 2018, vol. 38, issue 6, 645-672
Abstract:
We investigate the out‐of‐sample predictability of implied volatility using the information over the implied volatility surface. We show that implied volatility surface is useful for the out‐of‐sample forecast of implied volatility up to 1 week ahead. Trading strategies based on the predictability of implied volatility could generate significant risk‐adjusted gains after controlling for transaction costs. Significant results also depend on the way of modeling implied volatility surface. We then calibrate a two‐factor stochastic volatility option pricing model to implied volatility data. Results show that implied volatility is better explained by both long‐ and short‐term variance factors.
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)
Downloads: (external link)
https://doi.org/10.1002/fut.21903
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:wly:jfutmk:v:38:y:2018:i:6:p:645-672
Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0270-7314
Access Statistics for this article
Journal of Futures Markets is currently edited by Robert I. Webb
More articles in Journal of Futures Markets from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().