Volatility forecasts embedded in the prices of crude‐oil options
Dudley Gilder and
Leonidas Tsiaras ()
Journal of Futures Markets, 2020, vol. 40, issue 7, 1127-1159
This paper evaluates the ability of alternative option‐implied volatility measures to forecast crude‐oil return volatility. We find that a corridor implied volatility measure that aggregates information from a narrow range of option contracts consistently outperforms forecasts obtained by the popular Black–Scholes and model‐free volatility expectations, as well as those generated by a realized volatility model. This measure ranks favorably in regression‐based tests, delivers the lowest forecast errors under different loss functions, and generates economically significant gains in volatility timing exercises. Our results also show that the Chicago Board Options Exchange's “oil‐VIX” index performs poorly, as it routinely produces the least accurate forecasts.
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
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:wly:jfutmk:v:40:y:2020:i:7:p:1127-1159
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 ().