Intermediate Volatility Forecasts Using Implied Forward Volatility: The Performance of Selected Agricultural Commodity Options

Thorsten M. Egelkraut and Philip Garcia

No 19033, 2005 Conference, April 18-19, 2005, St. Louis, Missouri from NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management

Abstract: Options with different maturities can be used to generate an implied forward volatility, a volatility forecast for non-overlapping future time intervals. Using five commodities with varying characteristics, we find that the implied forward volatility dominates forecasts based on historical volatility information, but that the predictive accuracy is affected by the commodity's characteristics. Unbiased and efficient corn and soybeans market forecasts are attributable to the well-established volatility during crucial growing periods. For soybean meal, wheat, and hogs volatility is less predictable, and investors appear to demand a risk premium for bearing volatility risk.

Keywords: Marketing (search for similar items in EconPapers)
Pages: 21
Date: 2005
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Journal Article: Intermediate Volatility Forecasts Using Implied Forward Volatility: The Performance of Selected Agricultural Commodity Options (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:ncrfiv:19033

DOI: 10.22004/ag.econ.19033

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