It is well known that for options with the same expiration date, levels of implied volatility differ systematically by strike price in a smile or smirk pattern. We show that (in the equity index options market) information content also differs systematically by strike price displaying a...

The paper compares the forecasting ability of the most popular volatility forecasting models and develops an alternative. The comparison of existing models focuses on four issues: 1) the relative weighting of recent versus older observations, 2) the estimation criteria, 3) the trade-off in terms...

According to Jensen's inequality, a forecasting model cannot yield unbiased forecasts of both the variance and standard deviation of returns. We explore the bias in GARCH type model forecasts of the standard deviation of returns, which we argue is a more appropriate volatility measure than the...

Option pricing models and longer-term VaR models typically require volatility forecasts over horizons considerably longer than the data frequency. These are generally generated from short-horizon forecasts by successive forward substitution. We document deficiencies with the resulting...

We examine whether any second order derivatives besides gamma and any third order derivatives are important in explaining changes in the prices of Samp;P 500 futures options over one week holding periods. We find that while gamma is normally the most important of the higher order derivatives,...

We examine whether any second order derivatives other than gamma and any third order derivatives are important in explaining changes in the prices of Samp;P 500 futures options over one week holding periods. We find that while gamma is normally most important, several other higher order...

Options researchers have argued that by averaging together implied standard deviations, or ISDs, calculated from several options with the same expiry but different strikes, the noise in individual ISDs can be reduced, yielding a better measure of the market's volatility expectation. Various...