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The imprecision of volatility indexes

Rohini Grover () and Ajay Shah ()
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Rohini Grover: Indira Gandhi Institute of Development Research

Indira Gandhi Institute of Development Research, Mumbai Working Papers from Indira Gandhi Institute of Development Research, Mumbai, India

Abstract: Concerns about sampling noise arise when a VIX estimator is computed by aggregating several imprecise implied volatility estimates. We propose a bootstrap strategy to measure the imprecision of a model based VIX estimator. We find that the imprecision of VIX is economically significant. We propose a model selection strategy,where alternative statistical estimators of VIX are evaluated based on this imprecision.

Keywords: Implied volatility; volatility index; imprecision (search for similar items in EconPapers)
JEL-codes: G12 G13 G17 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm, nep-fmk, nep-ger and nep-rmg
Date: 2014-08
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Persistent link: https://EconPapers.repec.org/RePEc:ind:igiwpp:2014-031

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