This chapter surveys the methods available for extracting information from option prices that can be used in forecasting. We consider option-implied volatilities, skewness, kurtosis, and densities. More generally, we discuss how any forecasting object which is a twice differentiable function of...

The existing literature finds that information not captured by traditional term structure factors helps predict excess bond returns. When estimating no-arbitrage affine term structure models, aligning in-sample and out-of-sample objective functions results in term structure factors that capture...