This study compares the performances of neural network and Black-Scholes models in pricing BIST30 (Borsa Istanbul) index call and put options with different volatility forecasting approaches. Since the volatility is the key parameter in pricing options, GARCH (Generalized Autoregressive...

We estimate in this paper the market risk implied by the prices of different options traded in the Brazilian stock market. The fundamental theory to handle this problem is the one implied by the Arrow-Debreu contingent claim concept. Using that theory, we are able to construct the term structure...

This paper proposes a method for constructing a volatility risk premium, or investor risk aversion, index. The method is intuitive and simple to implement, relying on the sample moments of the recently popularized model-free realized and option-implied volatility measures. A small-scale Monte...

The volatility information content of stock options for individual firms is measured using option prices for 149 U.S. firms and the S&P 100 index. ARCH and regression models are used to compare volatility forecasts defined by historical stock returns, at-the-money implied volatilities and...

The slope of the implied volatility term structure is positively related to future option returns. We rank firms based on the slope of the volatility term structure and analyze the returns for straddle portfolios. Straddle portfolios with high slopes of the volatility term structure outperform...

We examine the effects of limited investor attention on stock returns by using Google search volume index to measure investor attention. We also investigate whether national culture and market development have any role in this relationship. We find that the impact of investor attention on stock...

The aim of this paper is twofold: to investigate how the information content of implied volatility varies according to moneyness and option type and to compare the latter option based forecasts with historical volatility in order to see if they subsume all the information contained in the...

The aim of this paper is twofold: to investigate how the information content of implied volatility varies according to moneyness and option type, and to compare option-based forecasts with historical volatility in order to see if they subsume all the information contained in historical...

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...

We propose a simple model in which realized stock market return volatility and implied volatility backed out of option prices are subject to common level shifts corresponding to movements between bull and bear markets. The model is estimated using the Kalman filter in a generalization to the...