Yes, implied volatilities are not informationally efficient: an empirical estimate using options on interest rate futures contracts

Giulio Cifarelli (giulio.cifarelli@unifi.it)

MPRA Paper from University Library of Munich, Germany

Abstract: The accuracy of volatility forecast estimators has been assessed using daily overlapping and non overlapping observations on two major short-term interest rate futures contracts traded in London. The use of a panelized data set has eliminated some of the drawbacks usually associated with non overlapping data estimation, such as the lack of accuracy due to an insufficient number of observations or the arbitrariness of the choice of tenor. In the same way non stationarity and long memory characteristics of daily overlapping time series are disposed of. Information content estimation in levels associated with the Hansen (1982) variance covariance matrix estimator provides reasonably accurate estimates, broadly similar to the corresponding benchmark panel data ones.

Keywords: Options; stochastic volatility; panel data analysis (search for similar items in EconPapers)
JEL-codes: C22 C23 G14 (search for similar items in EconPapers)
Date: 2004-02
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