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Forecasting The Term Structure Of Implied Volatilities
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Book Synopsis Forecasting the Term Structure of Implied Volatilities by : Biao Guo
Download or read book Forecasting the Term Structure of Implied Volatilities written by Biao Guo and published by . This book was released on 2015 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: Neumann and Skiadopoulos (2013) document that although the implied volatilities are predictable, their economic profits become insignificant once the cost is accounted for. We show that the trading strategies based on the predictability of implied volatilities could generate significant risk-adjusted returns after controlling for the transaction cost. The implied volatility curve information is useful for the out-of-sample forecast of implied volatilities up to one week. Short-maturity implied volatilities tend to be more predictable than longmaturity implied volatilities. Although the long-maturity options are much less traded than the short-maturity options, their implied volatilities provide much more information on the price discovery.
Book Synopsis The Implied Volatility Term Structure of Stock Index Options by : Scott Mixon
Download or read book The Implied Volatility Term Structure of Stock Index Options written by Scott Mixon and published by . This book was released on 2000 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper tests the expectations hypothesis of the term structure of implied volatility for several national stock market indices (Samp;P 500, FTSE 100, DAX, CAC, and Nikkei 225). The tests indicate that the slope of at-the-money implied volatility over different maturities has predictive ability for future short dated implied volatility, although not to the extent predicted by the expectations hypothesis. Equivalently, the forward implied volatility is a biased forecast of future implied volatility. The low forecast power may be due to a failure to control for a risk premium in the prices of options. Evidence is presented that a time varying risk premium that increases in volatility is consistent with the results. Including a volatility risk proxy in the specification improves the forecasting ability beyond that embedded in the implied volatility term structure.
Book Synopsis How Important is the Term Structure in Implied Volatility Surface Modeling? Evidence from Foreign Exchange Options by : George Chalamandaris
Download or read book How Important is the Term Structure in Implied Volatility Surface Modeling? Evidence from Foreign Exchange Options written by George Chalamandaris and published by . This book was released on 2013 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: We claim that previously proposed parametric specifications that linearly approximate the term structure of the implied volatility surface (IVS) in option prices fail to capture important information regarding the expectations of market participants. This paper proposes a parametric specification for describing the IVS that allows flexible modeling of the term structure through a Nelson and Siegel (1987) factorization, recently proposed by Diebold and Li (2006) in the context of yield curve modeling. The specification is tested on implied volatilities from the overndash;thendash;counter foreign exchange options market, where contracts with long expiries are actively traded and thus the term structure dimension of the surface should be very important. We first show that the proposed volatility specification can consistently and remarkably improve our ability to describe the surface on any given day. We then establish the economic relevance of the incremental information captured by our proposed specification by showing that it can produce more accurate forecasts of implied volatility that can support longndash;term profitable trading strategies in the absence of transaction costs.
Book Synopsis Volatility Surface and Term Structure by : Kin Keung Lai
Download or read book Volatility Surface and Term Structure written by Kin Keung Lai and published by Routledge. This book was released on 2013-09-11 with total page 102 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book provides different financial models based on options to predict underlying asset price and design the risk hedging strategies. Authors of the book have made theoretical innovation to these models to enable the models to be applicable to real market. The book also introduces risk management and hedging strategies based on different criterions. These strategies provide practical guide for real option trading. This book studies the classical stochastic volatility and deterministic volatility models. For the former, the classical Heston model is integrated with volatility term structure. The correlation of Heston model is considered to be variable. For the latter, the local volatility model is improved from experience of financial practice. The improved local volatility surface is then used for price forecasting. VaR and CVaR are employed as standard criterions for risk management. The options trading strategies are also designed combining different types of options and they have been proven to be profitable in real market. This book is a combination of theory and practice. Users will find the applications of these financial models in real market to be effective and efficient.
Book Synopsis Analysis of the Term Structure of Implied Volatilities by : Christianus Cornelis Johannes Maria Heynen
Download or read book Analysis of the Term Structure of Implied Volatilities written by Christianus Cornelis Johannes Maria Heynen and published by . This book was released on 1993 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Analysis of the Term Structure of Implied Volatilities by : R. T. Ahokas
Download or read book Analysis of the Term Structure of Implied Volatilities written by R. T. Ahokas and published by . This book was released on 1997 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Handbook of Financial Econometrics and Statistics by : Cheng-Few Lee
Download or read book Handbook of Financial Econometrics and Statistics written by Cheng-Few Lee and published by Springer. This book was released on 2014-09-28 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Handbook of Financial Econometrics and Statistics provides, in four volumes and over 100 chapters, a comprehensive overview of the primary methodologies in econometrics and statistics as applied to financial research. Including overviews of key concepts by the editors and in-depth contributions from leading scholars around the world, the Handbook is the definitive resource for both classic and cutting-edge theories, policies, and analytical techniques in the field. Volume 1 (Parts I and II) covers all of the essential theoretical and empirical approaches. Volumes 2, 3, and 4 feature contributed entries that showcase the application of financial econometrics and statistics to such topics as asset pricing, investment and portfolio research, option pricing, mutual funds, and financial accounting research. Throughout, the Handbook offers illustrative case examples and applications, worked equations, and extensive references, and includes both subject and author indices.
Book Synopsis Term Structure Forecasts of Volatility and Option Portfolio Returns by : Jim Campasano
Download or read book Term Structure Forecasts of Volatility and Option Portfolio Returns written by Jim Campasano and published by . This book was released on 2018 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: I examine the predictability of equity implied volatility from the term structure, and find that forward volatility levels are biased predictors of future spot implied volatility. I construct options structures which proxy for forward volatility assets, and show that a long-short portfolio of forward volatility assets produce significantly profitable returns. As the construction of the trade is borne from a violation of an expectations hypothesis, the strategy is similar to the carry trade effected in foreign exchange and other assets. Unlike the returns to carry in foreign exchange and other assets, the forward volatility assets are not exposed to liquidity or volatility risks and negatively loads on market risk.
Book Synopsis Option Volatility & Pricing: Advanced Trading Strategies and Techniques by : Sheldon Natenberg
Download or read book Option Volatility & Pricing: Advanced Trading Strategies and Techniques written by Sheldon Natenberg and published by McGraw Hill Professional. This book was released on 1994-08 with total page 485 pages. Available in PDF, EPUB and Kindle. Book excerpt: Provides a thorough discussion of volatility, the most important aspect of options trading. Shows how to identify mispriced options and to construct volatility and "delta neutral" spreads.
Book Synopsis Forecasting Volatility in the Financial Markets by : John L. Knight
Download or read book Forecasting Volatility in the Financial Markets written by John L. Knight and published by Butterworth-Heinemann. This book was released on 2002 with total page 428 pages. Available in PDF, EPUB and Kindle. Book excerpt: This text assumes that the reader has a firm grounding in the key principles and methods of understanding volatility measurement and builds on that knowledge to detail cutting edge modeling and forecasting techniques. It then uses a technical survey to explain the different ways to measure risk and define the different models of volatility and return.
Book Synopsis Essays on the Volatility of the Term Structure of Interest Rates by : Miguel A. Ferreira
Download or read book Essays on the Volatility of the Term Structure of Interest Rates written by Miguel A. Ferreira and published by . This book was released on 2000 with total page 204 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Yield Curve Modeling and Forecasting by : Francis X. Diebold
Download or read book Yield Curve Modeling and Forecasting written by Francis X. Diebold and published by Princeton University Press. This book was released on 2013-01-15 with total page 223 pages. Available in PDF, EPUB and Kindle. Book excerpt: Understanding the dynamic evolution of the yield curve is critical to many financial tasks, including pricing financial assets and their derivatives, managing financial risk, allocating portfolios, structuring fiscal debt, conducting monetary policy, and valuing capital goods. Unfortunately, most yield curve models tend to be theoretically rigorous but empirically disappointing, or empirically successful but theoretically lacking. In this book, Francis Diebold and Glenn Rudebusch propose two extensions of the classic yield curve model of Nelson and Siegel that are both theoretically rigorous and empirically successful. The first extension is the dynamic Nelson-Siegel model (DNS), while the second takes this dynamic version and makes it arbitrage-free (AFNS). Diebold and Rudebusch show how these two models are just slightly different implementations of a single unified approach to dynamic yield curve modeling and forecasting. They emphasize both descriptive and efficient-markets aspects, they pay special attention to the links between the yield curve and macroeconomic fundamentals, and they show why DNS and AFNS are likely to remain of lasting appeal even as alternative arbitrage-free models are developed. Based on the Econometric and Tinbergen Institutes Lectures, Yield Curve Modeling and Forecasting contains essential tools with enhanced utility for academics, central banks, governments, and industry.
Book Synopsis Forecasting Volatility in the Financial Markets by : Stephen Satchell
Download or read book Forecasting Volatility in the Financial Markets written by Stephen Satchell and published by Elsevier. This book was released on 2011-02-24 with total page 428 pages. Available in PDF, EPUB and Kindle. Book excerpt: Forecasting Volatility in the Financial Markets, Third Edition assumes that the reader has a firm grounding in the key principles and methods of understanding volatility measurement and builds on that knowledge to detail cutting-edge modelling and forecasting techniques. It provides a survey of ways to measure risk and define the different models of volatility and return. Editors John Knight and Stephen Satchell have brought together an impressive array of contributors who present research from their area of specialization related to volatility forecasting. Readers with an understanding of volatility measures and risk management strategies will benefit from this collection of up-to-date chapters on the latest techniques in forecasting volatility. Chapters new to this third edition:* What good is a volatility model? Engle and Patton* Applications for portfolio variety Dan diBartolomeo* A comparison of the properties of realized variance for the FTSE 100 and FTSE 250 equity indices Rob Cornish* Volatility modeling and forecasting in finance Xiao and Aydemir* An investigation of the relative performance of GARCH models versus simple rules in forecasting volatility Thomas A. Silvey Leading thinkers present newest research on volatility forecasting International authors cover a broad array of subjects related to volatility forecasting Assumes basic knowledge of volatility, financial mathematics, and modelling
Book Synopsis The Term Structure of Volatility Predictability by : Xingyi Li
Download or read book The Term Structure of Volatility Predictability written by Xingyi Li and published by . This book was released on 2019 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: Volatility forecasting is crucial for portfolio management, risk management, and pricing of derivative securities. Still, little is known about the accuracy of volatility forecasts and the horizon of volatility predictability. This paper aims to fill these gaps in the literature. We begin this paper by introducing the notions of the spot and forward predicted volatilities and propose to describe the term structure of volatility predictability by the spot and forward forecast accuracy curves. Then we perform a comprehensive study on the term structure of volatility predictability in the stock and foreign exchange markets. Our results quantify the volatility forecast accuracy across horizons in the two major markets and suggest that the horizon of volatility predictability is significantly longer than that reported in the earlier studies. Nevertheless, the horizon of volatility predictability is found to be much shorter than the longest maturity of traded derivative contracts.
Book Synopsis Expectations hypothesis of the term structure of implied volatility: re-examination by : Soku Byoun
Download or read book Expectations hypothesis of the term structure of implied volatility: re-examination written by Soku Byoun and published by . This book was released on 1999 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis A Practical Guide to Forecasting Financial Market Volatility by : Ser-Huang Poon
Download or read book A Practical Guide to Forecasting Financial Market Volatility written by Ser-Huang Poon and published by John Wiley & Sons. This book was released on 2005-08-19 with total page 236 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial market volatility forecasting is one of today's most important areas of expertise for professionals and academics in investment, option pricing, and financial market regulation. While many books address financial market modelling, no single book is devoted primarily to the exploration of volatility forecasting and the practical use of forecasting models. A Practical Guide to Forecasting Financial Market Volatility provides practical guidance on this vital topic through an in-depth examination of a range of popular forecasting models. Details are provided on proven techniques for building volatility models, with guide-lines for actually using them in forecasting applications.
Book Synopsis Nonlinear Time Series Analysis by : Ruey S. Tsay
Download or read book Nonlinear Time Series Analysis written by Ruey S. Tsay and published by John Wiley & Sons. This book was released on 2018-09-14 with total page 466 pages. Available in PDF, EPUB and Kindle. Book excerpt: A comprehensive resource that draws a balance between theory and applications of nonlinear time series analysis Nonlinear Time Series Analysis offers an important guide to both parametric and nonparametric methods, nonlinear state-space models, and Bayesian as well as classical approaches to nonlinear time series analysis. The authors—noted experts in the field—explore the advantages and limitations of the nonlinear models and methods and review the improvements upon linear time series models. The need for this book is based on the recent developments in nonlinear time series analysis, statistical learning, dynamic systems and advanced computational methods. Parametric and nonparametric methods and nonlinear and non-Gaussian state space models provide a much wider range of tools for time series analysis. In addition, advances in computing and data collection have made available large data sets and high-frequency data. These new data make it not only feasible, but also necessary to take into consideration the nonlinearity embedded in most real-world time series. This vital guide: • Offers research developed by leading scholars of time series analysis • Presents R commands making it possible to reproduce all the analyses included in the text • Contains real-world examples throughout the book • Recommends exercises to test understanding of material presented • Includes an instructor solutions manual and companion website Written for students, researchers, and practitioners who are interested in exploring nonlinearity in time series, Nonlinear Time Series Analysis offers a comprehensive text that explores the advantages and limitations of the nonlinear models and methods and demonstrates the improvements upon linear time series models.
