Tsiaras, Leonidas and Gilder, Dudley (2020). Volatility Forecasts Embedded in the Prices of Crude-Oil Options. Journal of Futures Markets, 40 (7), pp. 1127-1159.
Abstract
This paper evaluates the ability of alternative option-implied volatility measures to forecast crude-oil return volatility. We find that a corridor implied volatility measure that aggregates information from a narrow range of option contracts consistently outperforms forecasts obtained by the popular Black–Scholes and model-free volatility expectations, as well as those generated by a realized volatility model. This measure ranks favorably in regression-based tests, delivers the lowest forecast errors under different loss functions, and generates economically significant gains in volatility timing exercises. Our results also show that the Chicago Board Options Exchange's “oil-VIX” index performs poorly, as it routinely produces the least accurate forecasts.
Publication DOI: | https://doi.org/10.1002/fut.22114 |
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Divisions: | College of Business and Social Sciences > Aston Business School > Economics, Finance & Entrepreneurship College of Business and Social Sciences > Aston Business School |
Additional Information: | © 2020 The Authors. The Journal of Futures Markets published by Wiley Periodicals, Inc. This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited |
Uncontrolled Keywords: | option-implied volatility,realized variance,volatility forecasting,Accounting,General Business,Management and Accounting,Finance,Economics and Econometrics |
Publication ISSN: | 1096-9934 |
Last Modified: | 30 Sep 2024 12:16 |
Date Deposited: | 06 Dec 2019 11:54 |
Full Text Link: | |
Related URLs: |
https://onlinel ... .1002/fut.22114
(Publisher URL) http://www.scop ... tnerID=8YFLogxK (Scopus URL) |
PURE Output Type: | Article |
Published Date: | 2020-07-01 |
Published Online Date: | 2020-04-13 |
Accepted Date: | 2019-12-01 |
Authors: |
Tsiaras, Leonidas
(
0000-0002-4154-4210)
Gilder, Dudley |
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Version: Published Version
License: Creative Commons Attribution
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