Corridor implied volatility is obtained from model-free implied volatility by truncating the integration domain between two barriers. Empirical evidence on volatility forecasting, in various markets, points to the utility of trimming the risk-neutral distribution of the underlying stock price, in order to obtain unbiased measures of future realised volatility (see e.g. [9], [3]). The aim of the paper is to investigate, both in a statistical and in an economic setting, the optimal corridor of strike prices to use for volatility forecasting in the Italian market, by analysing a data set which covers the years 2005-2010 and span both a relatively tranquil and a turmoil period.

Muzzioli, S.. "The optimal corridor for implied volatility: from calm to turmoil periods" Working paper, DEMB WORKING PAPER SERIES, Dipartimento di Economia Marco Biagi - Università di Modena e Reggio Emilia, 2013. https://doi.org/10.25431/11380_1023317

The optimal corridor for implied volatility: from calm to turmoil periods

Muzzioli, S.
2013

Abstract

Corridor implied volatility is obtained from model-free implied volatility by truncating the integration domain between two barriers. Empirical evidence on volatility forecasting, in various markets, points to the utility of trimming the risk-neutral distribution of the underlying stock price, in order to obtain unbiased measures of future realised volatility (see e.g. [9], [3]). The aim of the paper is to investigate, both in a statistical and in an economic setting, the optimal corridor of strike prices to use for volatility forecasting in the Italian market, by analysing a data set which covers the years 2005-2010 and span both a relatively tranquil and a turmoil period.
Dicembre
Muzzioli, S.
Muzzioli, S.. "The optimal corridor for implied volatility: from calm to turmoil periods" Working paper, DEMB WORKING PAPER SERIES, Dipartimento di Economia Marco Biagi - Università di Modena e Reggio Emilia, 2013. https://doi.org/10.25431/11380_1023317
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11380/1023317
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