Forecasting swap rate volatility with information from swaptions

Xiaoxi Liu and Jinming Xie

Journal of Futures Markets, 2023, vol. 43, issue 4, 455-479

Abstract: We examine the predictability of the model‐free implied volatility from swaptions on future realized volatility of the underlying swap rates. The model‐free implied volatility demonstrates significant predictability on future realized volatility of swap rates along a wide cross‐section of tenors. The predictive power of the model‐free implied volatility is superior to the predictability of lagged realized volatility and generalized autoregressive conditional heteroskedasticity‐type conditional volatility. The superior predictive power of the model‐free implied volatility also holds out‐of sample, in different market states and with longer forecasting horizons.

Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1002/fut.22395

Related works:
Working Paper: Forecasting swap rate volatility with information from swaptions (2023)
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:43:y:2023:i:4:p:455-479

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 ().