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Does Implied Volatility Predict Realized Volatility?: An Examination of Market Expectations
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics.
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics.
2014 (English)Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

The informational content of implied volatility and its prediction power is evaluated for time horizons of one month. The study covers the period of November 2007 to November 2013 for the two indices S&P500 and OMXS30. The findings are put in relation to the corresponding results for past realized volatility. We find results supporting that implied volatility is an efficient, although biased estimator of realized volatility. Our results support the common notion that implied volatility predicts realized volatility better than past realized volatility, and that it also subsumes most of the informational content of past realized volatility.

Place, publisher, year, edition, pages
2014.
Keyword [en]
Implied volatility, index options, Black-Scholes, market efficiency
National Category
Economics
Identifiers
URN: urn:nbn:se:uu:diva-218792OAI: oai:DiVA.org:uu-218792DiVA: diva2:697293
Subject / course
Economics
Educational program
Ekonomie kandidatprogrammet
Supervisors
Examiners
Available from: 2014-03-13 Created: 2014-02-17 Last updated: 2014-03-13Bibliographically approved

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Does implied volatility predict realized volatility?(10739 kB)4980 downloads
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CiteExportLink to record
Permanent link

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Citation style
  • apa
  • ieee
  • modern-language-association
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf