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The Information content of the risk-neutral skewness for Volatility Forecasting

초록

영어

This paper investigates the information content of the risk-neutral skewness derived from S&P 500 index option prices for forecasting future volatility. Empirical results show that the risk-neutral skewness provides incremental explanatory power for future volatility. Moreover, the models with the risk-neutral skewness dominate in terms of out-of-sample forecasting performance, especially during the 2007-2008 financial crisis.

목차

Abstract
 1. Introduction
 2. The relation between the physical volatility and the higher-order moments of the risk-neutral distribution
 3. Volatility Measurement and Model Specification
  3.1 Measuring Volatility
  3.2 Volatility Forecasting Model
 4. Empirical results
  4.1 Data
  4.2 Risk-Neutral Skewness
  4.3 The information of the risk-neutral skewness for continuous volatility component
  4.4 The information of the risk-neutral skewness for the realized volatility
  4.5 Performance Criteria
  4.6 Out-of-Sample Forecasting Performance
 5. Robustness check
  5.1 The information of the risk-neutral excess kurtosis for future volatility
  5.2 The information of the implied volatility skew for future volatility
  5.3 The information of the physical skewness for future volatility
  5.4 The information of the model free implied skew
 6. Conclusion
 Reference
 Table

저자정보

  • Suk Joon Byun KAIST Business School, Korea
  • Jun Sik Kim KAIST Business School, Korea

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