EconPapers    
Economics at your fingertips  
 

The Optimal Corridor for Implied Volatility: from Calm to Turmoil Periods

Silvia Muzzioli ()

Department of Economics (DEMB) from University of Modena and Reggio Emilia, Department of Economics "Marco Biagi"

Abstract: Corridor implied volatility is obtained from model-free implied volatility by truncating the integration domain between two barriers. Empirical evidence on volatility forecasting, in various markets, points to the utility of trimming the risk-neutral distribution of the underlying stock price, in order to obtain unbiased measures of future realised volatility (see e.g. [9], [3]). The aim of the paper is to investigate, both in a statistical and in an economic setting, the optimal corridor of strike prices to use for volatility forecasting in the Italian market, by analysing a data set which covers the years 2005-2010 and span both a relatively tranquil and a turmoil period

Keywords: corridor implied volatility; model-free implied volatility; volatility forecasting; financial turmoil (search for similar items in EconPapers)
JEL-codes: G13 G14 (search for similar items in EconPapers)
Pages: pages 26
Date: 2013-12
New Economics Papers: this item is included in nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://155.185.68.2/wpdemb/0029.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mod:dembwp:0029

Access Statistics for this paper

More papers in Department of Economics (DEMB) from University of Modena and Reggio Emilia, Department of Economics "Marco Biagi" Contact information at EDIRC.
Bibliographic data for series maintained by Sara Colombini ().

 
Page updated 2024-07-10
Handle: RePEc:mod:dembwp:0029