The volatility specification of the Markov-switching Multifractal (MSM) model is proposed as an alternative mechanism for realized volatility (RV). We estimate the RV-MSM model via Generalized Method of Moments and perform forecasting by means of best linear forecasts derived via the...

We address the problem of defining and calculating forward volatility implied by option prices when the underlying asset is driven by a stochastic volatility process. We examine alternative notions of forward implied volatility and the information required to extract these measures from the...

Using options price data on the Taiwanese stock market, we propose an options trading strategy based on the forecasting of volatility direction. The forecasting models are constructed with the incorporation of absolute returns, heterogeneous autoregressive-realized volatility (HAR-RV), and proxy...

In this paper we derive conditions for the conditional covariance matrix to be positive definite in a general vector ARCH model. The conditions can be easily extended to the diagonal vector GARCH model. For the general vector GARCH model, analytical expressions for the conditions in terms of the...