Forward/forward volatility derived from options' implied volatilities is a measure of the market's expectation of future volatility. We examine the factors affecting forward/forward volatility and present evidence of its predictive performance based on FTSE100 index options.

The UK option market is unique in trading both American-style and European-style contracts on the same underlying stock index. We use high-frequency quote data to examine the magnitude and distribution of the bid-ask spreads on these contracts, which are found to be at least partly determined by...