The implied volatility quot;smilequot; embodied in option prices has generally been attributed to errors in the Black-Scholes model, specifically the assumption of constant volatility or the assumption of log-normal returns. In other words, the presumption is that, if the implied volatilities...

Based on the law of large numbers, several options researchers have proposed using (different) weighted averages of the implied standard deviations, ISD, calculated from numerous options with the same expiry to obtain a single best ISD measure. However, most commercial providers use an average...

It is well known that for options with the same expiration date, levels of implied volatility differ systematically by strike price in a smile or smirk pattern. We show that (in the equity index options market) information content also differs systematically by strike price displaying a...

According to Jensen's inequality, a forecasting model cannot yield unbiased forecasts of both the variance and standard deviation of returns. We explore the bias in GARCH type model forecasts of the standard deviation of returns, which we argue is a more appropriate volatility measure than the...

We examine how prices in interest rate and foreign exchange futures markets adjust to the new information contained in scheduled macroeconomic news releases in the very short run. Using 10-second returns and tick-by-tick data, we find that prices adjust in a series of numerous small, but rapid,...