Corridor implied volatility introduced in Carr and Madan (1998) and recently implemented in Andersen and Bondarenko (2007) is obtained from model-free implied volatility by truncating the integration domain between two barriers. Corridor implied volatility is implicitly linked with the concept...

The aim of this paper is to analyse and empirically test how to unlock volatility information from option prices. The information content of three option based forecasts of volatility: Black-Scholes implied volatility, model-free implied volatility and corridor implied volatility is addressed,...

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,...

This paper deals with a long-standing issue in finance: whether the market reaction to second-hand information is caused by price pressure or by dissemination. We use the perspective of attention grabbing as a particular form of price pressure to analyze the market reaction to the dissemination...

Implied trees are simple non-parametric discretizations of one- or two-dimension diffusions, aimed at introducing non-constant volatility in an option pricing model. The aim of the paper is twofold. First we investigate the ability of different option implied trees in pricing European options....

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,...

Implied trees are simple non-parametric discretizations of one- or two-dimension diffusions, aimed at introducing non-constant volatility in an option pricing model. The aim of the paper is twofold. First we investigate the ability of different option implied trees in pricing European options....

The aim of the present paper is to provide evidence on the internal market efficiency of the Italian index option market. To this end a model-free approach is taken, whereby strategies involving only options are tested by means of a high frequency dataset covering the period 1 September – 31...

The birth and success of index option markets have fostered empirical research on their efficiency. While most of the literature focuses on North American markets, studies on European markets are still limited. The aim of the present paper is to provide further evidence on a European market, the...

A major issue in the construction of implied trees is the no arbitrage property preservation. Within the literature on deterministic smile-consistent trees using forward induction, two major contributions are: Derman and Kani (1994) and Barle and Cakici (1998). The former proposes a methodology...