The Term Structure Of Volatility Predictability PDF Download
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| Author | : Xingyi Li |
| Publisher | : |
| Total Pages | : 37 |
| Release | : 2019 |
| Genre | : |
| ISBN | : |
Download The Term Structure of Volatility Predictability Book in PDF, ePub and Kindle
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.
| Author | : Valeriy Zakamulin |
| Publisher | : |
| Total Pages | : 0 |
| Release | : 2018 |
| Genre | : |
| ISBN | : |
Download The Limits to Volatility Predictability Book in PDF, ePub and Kindle
Volatility forecasting is crucial for portfolio management, risk management, and pricing of derivative securities. Still, little is known about how far ahead one can forecast volatility. First, in this paper we introduce 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, by employing a few popular time-series volatility models, we perform a comprehensive empirical study on the horizon of volatility predictability. Our results suggest that, whereas the spot volatility can be predicted over horizons that extend to 35 weeks, the horizon of the forward volatility predictability is rather short and limited to approximately 7.5 weeks. Finally, we suggest a plausible explanation for why standard models fail to provide sensible longer-horizon volatility forecasts.
| Author | : Biao Guo |
| Publisher | : |
| Total Pages | : 47 |
| Release | : 2015 |
| Genre | : Capital market |
| ISBN | : |
Download Forecasting the Term Structure of Implied Volatilities Book in PDF, ePub and Kindle
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.
| Author | : José Renato Haas Ornelas |
| Publisher | : |
| Total Pages | : |
| Release | : 2019 |
| Genre | : |
| ISBN | : |
Download Implied Volatility Term Structure and Exchange Rate Predictability Book in PDF, ePub and Kindle
| Author | : Jim Campasano |
| Publisher | : |
| Total Pages | : 41 |
| Release | : 2018 |
| Genre | : |
| ISBN | : |
Download Term Structure Forecasts of Volatility and Option Portfolio Returns Book in PDF, ePub and Kindle
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.
| Author | : Riza Demirer |
| Publisher | : |
| Total Pages | : 32 |
| Release | : 2019 |
| Genre | : |
| ISBN | : |
Download The U.S. Term Structure and Return Volatility in Emerging Stock Markets Book in PDF, ePub and Kindle
This paper examines the predictive power of the U.S. term structure over return volatility in emerging stock markets. Decomposing the term structure of U.S. Treasury yields into two components, the expectations factor and the maturity premium, we show that the U.S. term structure indeed contains predictive information over emerging stock market volatility, even after controlling for country specific factors including turnover and market size. While we observe heterogeneous patterns across emerging markets in terms of their predictability with respect to the U.S. term structure, we find that the market's expectation of future short term rates, implied by the expectations factor, serves as a stronger predictor of stock market volatility compared to the maturity premium component of the yield spread. We also find that the U.S. term structure has gained further predictive value following the global financial crisis, particularly for the BRICS nations of China, Russia, and S. Africa. Overall, our findings suggest that policymakers and investors can utilize interest rate signals from the U.S. Treasury yields to make projections over stock market volatility in their local markets, however, distinguishing between the two components of the yield curve could provide additional forecasting power depending on the country of focus.
| Author | : Ercan Balaban |
| Publisher | : |
| Total Pages | : 3 |
| Release | : 2017 |
| Genre | : |
| ISBN | : |
Download Forecasting the Term Structure of Volatility of Crude Oil Price Changes Book in PDF, ePub and Kindle
This is a pioneering effort to test the comparative performance of two competing models for out-of-sample forecasting the term structure of volatility of crude oil price changes employing both symmetric and asymmetric evaluation criteria. Under symmetric error statistics, our empirical model using the estimated growth factor of volatility through time is overall superior, and it beats in most cases the benchmark model of the square-root-of-time for holding periods between one and 250 days. Under asymmetric error statistics, if over-prediction (under-prediction) of volatility is undesirable, the empirical (benchmark) model is consistently superior. Relative performance of the empirical model is much higher for holding periods up to fifty days.
| Author | : Giacomo Bormetti |
| Publisher | : |
| Total Pages | : 49 |
| Release | : 2016 |
| Genre | : |
| ISBN | : |
Download Term Structure of Variance Risk Premium and Returns' Predictability Book in PDF, ePub and Kindle
We derive an analytic relation between equity risk premium and the term structure of variance risk premium (VRP). Motivated by this result, we estimate the VRP term structure using a general and fully analytical discrete-time option pricing framework featuring multiple volatility components and multiple risk premia. We confirm the importance of VRP in improving option pricing performances and show the ability of multi-component GARCH models to produce realistic hump-shaped VRP term structure. We finally uncover the strong predictive power of the shape of the VRP term structure, summarized by its slope, on future stock-index returns.
| Author | : Scott Mixon |
| Publisher | : |
| Total Pages | : |
| Release | : 2000 |
| Genre | : |
| ISBN | : |
Download The Implied Volatility Term Structure of Stock Index Options Book in PDF, ePub and Kindle
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.
| Author | : Ruey S. Tsay |
| Publisher | : John Wiley & Sons |
| Total Pages | : 466 |
| Release | : 2018-09-14 |
| Genre | : Mathematics |
| ISBN | : 1119264073 |
Download Nonlinear Time Series Analysis Book in PDF, ePub and Kindle
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.
