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dc.contributor.authorLuong, C.
dc.contributor.authorDokuchaev, Nikolai
dc.date.accessioned2017-01-30T11:20:26Z
dc.date.available2017-01-30T11:20:26Z
dc.date.created2014-11-05T20:00:31Z
dc.date.issued2014
dc.identifier.citationLuong, C. and Dokuchaev, N. 2014. Analysis of market volatility via a dynamically purified option price process. Annals of Financial Economics. 9 (3): 1450006 (19 pp.).
dc.identifier.urihttp://hdl.handle.net/20.500.11937/10701
dc.identifier.doi10.1142/S2010495214500067
dc.description.abstract

The paper studies methods of dynamic estimation of volatility for financial time series. We suggest to estimate the volatility as the implied volatility inferred from some artificial ‘dynamically purified' price process that in theory allows to eliminate the impact of the stock price movements. The complete elimination would be possible if the option prices were available for continuous sets of strike prices and expiration times. In practice, we have to use only finite sets of available prices. We discuss the construction of this process from the available option prices using different methods. In order to overcome the incompleteness of the available option prices, we suggest several interpolation approaches, including the first order Taylor series extrapolation and quadratic interpolation. We examine the potential of the implied volatility derived from this proposed process for forecasting of the future volatility, in comparison with the traditional implied volatility process such as the volatility index VIX.

dc.publisherWorld Scientific
dc.subjectimplied volatility
dc.subjectapproximation of missing data
dc.subjectvolatility index
dc.subjectpurified option prices
dc.subjectdynamic forecasting
dc.subjecteconometrics
dc.titleAnalysis of market volatility via a dynamically purified option price process
dc.typeJournal Article
dcterms.source.volumeTBA
dcterms.source.issn2010-4952
dcterms.source.titleAnnals of Financial Economics
curtin.note

Electronic version of an article published as Annals of Financial Economics. 9 (3), 2014, (19 Pages] http://doi.org/10.1142/S2010495214500067 ©copyright World Scientific Publishing Company, http://www.worldscientific.com/worldscinet/afe

curtin.departmentDepartment of Mathematics and Statistics
curtin.accessStatusOpen access


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