The purpose of this paper is to consider how to forecast implied volatility for a selection of UK companies with traded options on their stocks. The authors consider a range of GARCH and log--ARFIMA based models as well as some simple forecasting models. Overall, it is found that a log-ARFIMA...

This paper proposes the unobserved fundamental component of volatility as a measure of risk. This concept of fundamental volatility may be more meaningful than observed volatility for market regulators. Fundamental volatility may be obtained using a stochastic volatility model. The authors...