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The relationship between implied and realized volatility: evidence from the Australian stock index option market
| Content Provider | Semantic Scholar |
|---|---|
| Author | Li, Steven Yang, Qianqian |
| Copyright Year | 2009 |
| Abstract | This paper examines the relationship between the volatility implied in option prices and the subsequently realized volatility by using the S&P/ASX 200 index options (XJO) traded on the Australian Stock Exchange (ASX) during a period of 5 years. Unlike stock index options such as the S&P 100 index options in the US market, the S&P/ASX 200 index options are traded infrequently and in low volumes, and have a long maturity cycle. Thus an errors-in-variables problem for measurement of implied volatility is more likely to exist. After accounting for this problem by instrumental variable method, it is found that both call and put implied volatilities are superior to historical volatility in forecasting future realized volatility. Moreover, implied call volatility is nearly an unbiased forecast of future volatility. |
| Starting Page | 405 |
| Ending Page | 419 |
| Page Count | 15 |
| File Format | PDF HTM / HTML |
| DOI | 10.1007/s11156-008-0099-2 |
| Alternate Webpage(s) | https://core.ac.uk/download/pdf/10897762.pdf |
| Alternate Webpage(s) | https://doi.org/10.1007/s11156-008-0099-2 |
| Volume Number | 32 |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
