We propose constructing a set of trading strategies using predicted option returns for a relatively small forecasting period of ten trading days to form profitable hold-to-expiration, equally weighted, zero-cost portfolios based on 1-month at-the-money call and put options. We use a statistical...

We propose a new semi-parametric model for the implied volatility surface, which incorporates machine learning algorithms. Given a starting model, a tree-boosting algorithm sequentially minimizes the residuals of observed and estimated implied volatility. To overcome the poor predicting power of...