Arbeitspapier
The implied-realized volatility relation with jumps in underlying asset prices
Recent developments allow a nonparametric separation of the continuous sample path component and the jump component of realized volatility. The jump component has very different time series properties than the continuous component, and accounting for this allows improved forecasting of future realized volatility. We investigate the potential forecasting role of implied volatility backed out from option prices in the presence of these new separate realized volatility components. We show that implied volatility has incremental information relative to both the continuous and jump components of realized volatility when forecasting subsequently realized return volatility, and it appears to be an unbiased forecast. Furthermore, implied volatility has predictive power for future values of each component of realized volatility separately, showing in particular that even the jump component of realized volatility is, to some extent, predictable.
- Language
-
Englisch
- Bibliographic citation
-
Series: Queen's Economics Department Working Paper ; No. 1186
- Classification
-
Wirtschaft
Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
- Subject
-
bipower variation
implied volatility
instrumental variables
jumps
options
realized volatility
stock prices
vector autoregressive model
volatility forecasting
Börsenkurs
Volatilität
Prognose
Optionspreistheorie
Börsenkurs
VAR-Modell
Theorie
- Event
-
Geistige Schöpfung
- (who)
-
Christensen, Bent Jesper
Nielsen, Morten Ørregaard
- Event
-
Veröffentlichung
- (who)
-
Queen's University, Department of Economics
- (where)
-
Kingston (Ontario)
- (when)
-
2005
- Handle
- Last update
-
10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Christensen, Bent Jesper
- Nielsen, Morten Ørregaard
- Queen's University, Department of Economics
Time of origin
- 2005
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