Alternative estimates of weighted implied volatilities from soybean and live cattle options

✍ Scribed by Calum G. Turvey

• Publisher: John Wiley and Sons
• Year: 1990
• Tongue: English
• Weight: 780 KB
• Volume: 10
• Category: Article
• ISSN: 0270-7314
• DOI: 10.1002/fut.3990100404

✦ Synopsis

he volatility implied by options on future contracts is defined as that standard deviation which equates the theoretical Black (1978) option pricing formula to the observed option price. The measure is valuable as an ex ante predictor of futures price variance, and a substantial body of literature has found that this implied volatility (IV) is a more efficient predictor of option prices than historical volatility measures (Park and Sears (1985); Jordan (1987); Latane and Rendleman (1976); Chiras and Manaster (1978); Beckers (198 1);and Hauser and Neff (1985)). Implied volatilities are of particular value to hedgers and commodity analysts in providing anticipatory futures price changes, but are also of value to researchers studying market efficiency (e.g., Trippi (1977);