Forecasting with Option Implied Information

Peter Christoffersen, Kris Jacobs () and Bo Young Chang
Additional contact information
Kris Jacobs: University of Houston - C.T. Bauer College of Business, Postal: Houston, TX 77204-6021, United States

CREATES Research Papers from Department of Economics and Business Economics, Aarhus University

Abstract: This chapter surveys the methods available for extracting forward-looking information from option prices. We consider volatility, skewness, kurtosis, and density forecasting. More generally, we discuss how any forecasting object which is a twice differentiable function of the future realization of the underlying risky asset price can utilize option implied information in a well-defi?ned manner. Going beyond the univariate option-implied density, we also consider results on option-implied covariance, correlation and beta forecasting as well as the use of option-implied information in cross-sectional forecasting of equity returns.

Keywords: Volatility; skewness; kurtosis; density forecasting; risk-neutral. (search for similar items in EconPapers)
JEL-codes: C53 G13 G17 (search for similar items in EconPapers)
Pages: 65
Date: 2011-12-08
New Economics Papers: this item is included in nep-ets, nep-for and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

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Related works:
Chapter: Forecasting with Option-Implied Information (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:aah:create:2011-46

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