Arbeitspapier
The economic value of realized volatility: Using high-frequency returns for option valuation
Many studies have documented that daily realized volatility estimates based on intraday returns provide volatility forecasts that are superior to forecasts constructed from daily returns only. We investigate whether these forecasting improvements translate into economic value added. To do so we develop a new class of affine discrete-time option valuation models that use daily returns as well as realized volatility. We derive convenient closed-form option valuation formulas and we assess the option valuation properties using S&P500 return and option data. We find that realized volatility reduces the pricing errors of the benchmark model significantly across moneyness, maturity and volatility levels.
- Sprache
-
Englisch
- Erschienen in
-
Series: Bank of Canada Working Paper ; No. 2012-34
- Klassifikation
-
Wirtschaft
Contingent Pricing; Futures Pricing; option pricing
- Thema
-
Asset pricing
Econometric and statistical methods
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Christoffersen, Peter
Feunou, Bruno
Jacobs, Kris
Meddahi, Nour
- Ereignis
-
Veröffentlichung
- (wer)
-
Bank of Canada
- (wo)
-
Ottawa
- (wann)
-
2012
- DOI
-
doi:10.34989/swp-2012-34
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:43 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Christoffersen, Peter
- Feunou, Bruno
- Jacobs, Kris
- Meddahi, Nour
- Bank of Canada
Entstanden
- 2012
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