hh.sePublications
Change search
CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf
How reliable is implied volatility A comparison between implied and actual volatility on an index at the Nordic Market
Halmstad University, School of Information Science, Computer and Electrical Engineering (IDE).
2007 (English)Independent thesis Advanced level (degree of Master (One Year))Student thesis
Abstract [en]

Volatility forecast plays a central role in the financial decision making process. An intrinsic purpose of any investor is profit earning. For that purpose investors need to estimate the risk. One of the most efficient

methods to this end is the volatility estimation. In this theses I compare the CBOE Volatility Index, (VIX) with the actual volatility on an index at the Nordic Market. The actual volatility is defined as the one-day-ahead prediction as calculated by using the GARCH(1,1) model. By using the VIX model I performed consecutive predictions 30 days ahead between February the 2nd, 2007 to March

the 6th, 2007. These predictions were compared with the GARCH(1,1) one-day-ahead predictions for the same period. To my knowledge, such comparisons have not been performed earlier on the Nordic Market. The conclusion of the study was that the VIX predictions tends to higher values then the GARCH(1,1) predictions except for large prices upward jumps, which indicates that the VIX is not able to predict future shocks.

Except from these jumps, the VIX more often shows larger value than the GARCH(1,1). This is interpreted as an uncertainly of the prediction. However, the VIX predictions follows the actual volatility reasonable

well. I conclude that the VIX estimation can be used as a reliable estimator of market volatility.

Place, publisher, year, edition, pages
Högskolan i Halmstad/Sektionen för Informationsvetenskap, Data- och Elektroteknik (IDE) , 2007.
Keywords [en]
implied volatility, the CBOE Volatility Index, (VIX)
Identifiers
URN: urn:nbn:se:hh:diva-1635Local ID: 2082/2016OAI: oai:DiVA.org:hh-1635DiVA, id: diva2:238853
Presentation
(English)
Uppsok
Physics, Chemistry, Mathematics
Available from: 2008-06-25 Created: 2008-06-25 Last updated: 2009-10-26

Open Access in DiVA

fulltext(1239 kB)826 downloads
File information
File name FULLTEXT01.pdfFile size 1239 kBChecksum SHA-512
eb1d28c51064b0da2ffa43d607b8e0bf49aae89129f630201c3cb31f952b6be20ea89f66fb8327851f8729844406c8b6d10cff34a7607b082f931ce645fce1a90e9e146d5d8c1f5f9e5620fa5e780c68
Type fulltextMimetype application/pdf

By organisation
School of Information Science, Computer and Electrical Engineering (IDE)

Search outside of DiVA

GoogleGoogle Scholar
Total: 826 downloads
The number of downloads is the sum of all downloads of full texts. It may include eg previous versions that are now no longer available

urn-nbn

Altmetric score

urn-nbn
Total: 333 hits
CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf