The information content of implied volatility in agricultural commodity markets

Pierre Giot

No 2002038, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: In this paper we compare the incremental information content of lagged implied volatility to GARCH models of conditional volatility for a collection of agricultural commodities traded on the New York Board of Trade. We also assess the relevance of the additional information provided by the implied volatility in a risk management framework. It is first shown that past squared returns only marginally improve the information content provided by the lagged implied volatility. Secondly, Value-at-Risk (VaR) models that rely exclusively on lagged implied volatility perform as well as VaR models where the conditional variance is modelled according to GARCH type processes. These results indicate that the implied volatility for options on future contracts in agricultural commodity markets has a high information content regarding conditional variance and VaR forecasts.

Keywords: implied volatility; GARCH; Value-at-Risk; futures; agricultural commodity markets (search for similar items in EconPapers)
JEL-codes: C52 C53 G15 Q13 (search for similar items in EconPapers)
Date: 2002-06
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: The information content of implied volatility in agricultural commodity markets (2003)
Working Paper: The information content of implied volatility in agricultural commodity markets (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:2002038

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