Realized volatility forecasting and option pricing

被引:35
作者
Bandi, Federico M. [1 ]
Russell, Jeffrey R. [1 ]
Yang, Chen [1 ]
机构
[1] Univ Chicago, Grad Sch Business, Chicago, IL 60637 USA
关键词
Option pricing; Microstructure noise; Volatility forecasting; Economic metrics; Realized variance; Two-scale estimator; Realized kernels;
D O I
10.1016/j.jeconom.2008.09.002
中图分类号
F [经济];
学科分类号
02 ;
摘要
A growing literature advocates the use of microstructure noise-contaminated high-frequency data for the purpose of volatility estimation. This paper evaluates and compares the quality of several recently-proposed estimators in the context of a relevant economic metric, i.e., profits from option pricing and trading. Using forecasts obtained by virtue of alternative volatility estimates, agents price short-term options on the S&P 500 index before trading with each other at average prices. The agents' average Profits and the Sharpe ratios of the profits constitute the criteria used to evaluate alternative volatility estimates and the corresponding forecasts. For our data we find that estimators with Superior finite sample Mean-squared-error properties gene rate higher average profits and higher Sharpe ratios, in general. We confirm that, even from a forecasting standpoint, there is scope for optimizing the finite sample properties of alternative volatility estimators as advocated by Bandi and Russell [Bandi, F.M., Russell,J.R., 2005. Market microstructure noise, integrated variance estimators, and the accuracy of asymptotic approximations. Working Paper; Bandi, F.M., Russell, J.R., 2008b. Microstructure noise, realized Variance, and optimal sampling. Review of Economic Studies 75, 339-369] in recent work. (C) 2008 Elsevier B.V. All rights reserved
引用
收藏
页码:34 / 46
页数:13
相关论文
共 40 条
[1]   Out of sample forecasts of quadratic variation [J].
Ait-Sahalia, Yacine ;
Mancini, Loriano .
JOURNAL OF ECONOMETRICS, 2008, 147 (01) :17-33
[2]  
Andersen T.G., 2000, Risk Mag., V18, P105
[3]  
Andersen T.G., 1999, Working Paper
[4]   The distribution of realized stock return volatility [J].
Andersen, TG ;
Bollerslev, T ;
Diebold, FX ;
Ebens, H .
JOURNAL OF FINANCIAL ECONOMICS, 2001, 61 (01) :43-76
[5]   Modeling and forecasting realized volatility [J].
Andersen, TG ;
Bollerslev, T ;
Diebold, FX ;
Labys, P .
ECONOMETRICA, 2003, 71 (02) :579-625
[6]  
ANDERSEN TG, 2006, REALIZED VOLATILITY
[7]  
[Anonymous], 1995, STOCHASTIC INTEGRATI
[8]  
BANDI F, 2007, REALIZED VOLATILITY
[9]   Microstructure noise, realized variance, and optimal sampling [J].
Bandi, F. M. ;
Russell, J. R. .
REVIEW OF ECONOMIC STUDIES, 2008, 75 (02) :339-369
[10]  
Bandi F.M., 2003, MICROSTRUCTURE NOISE