We examine whether the dynamics of the implied volatility surface of individual equity options contains exploitable predictability patterns. Predictability in implied volatilities is expected due to the learning behavior of agents in option markets. In particular, we explore the possibility that...

This paper gives an arbitrage-free prediction for future prices of an arbitrary co-terminal set of options with a given maturity, based on the observed time series of these option prices. The statistical analysis of such a multi-dimensional time series of option prices corresponding to n strikes...

We ask whether option prices contain information on the likelihood and direction of jumps in the underlying stock prices. Applying the partial least squares (PLS) approach to the entire surface of the implied volatilities (IV), we show that option prices can successfully predict downward jumps...