Kane, Alex; Noh, Jaesun; Engle, Robert F. - National Bureau of Economic Research (NBER) - 1993
To forecast future option prices, autoregressive models of implied volatility derived from observed option prices are commonly employed [see Day and Lewis (1990), and Harvey and Whaley (1992)]. In contrast, the ARCH model proposed by Engle (1982) models the dynamic behavior in volatility,...