Implied and Realized Volatility: A Study of the Ratio Distribution

M. Dashti Moghaddam and R. A. Serota

Papers from arXiv.org

Abstract: We analyze correlations between squared volatility indices, VIX and VXO, and realized variances -- the known one, for the current month, and the predicted one, for the following month. We show that the ratio of the two is best fitted by a Beta Prime distribution, whose shape parameters depend strongly on which of the two months is used.

Date: 2018-10
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Published in Applied Economics and Finance (2019) Vol. 6, No. 5, pp. 104-130

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1810.07735

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