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Estimating stock index futures volatility through the prices of their options

โœ Scribed by Hun Y. Park; R. Stephen Sears

Publisher
John Wiley and Sons
Year
1985
Tongue
English
Weight
714 KB
Volume
5
Category
Article
ISSN
0270-7314

No coin nor oath required. For personal study only.

โœฆ Synopsis

Prior to the introduction of options on the S & P 500 futures, limits were imposed on the daily changes in 'See Cox, Ingeisoll, and Ross (1981) for discussion about the differences between forward and futures contracts when interest rates are stochastic. ESTIMATING STOCK FUTURES INDEX VOI.ATII.ITY / 225 'Since the ex-post volatilities are declining over time, different volatility estimates will be produced for different time intervals (e.g., 30 days, 60 days, time to expiration). Conceptually, the implied volatility measures, on an ex-ante basis, the ex-post variation until maturity. This article measures the ex-post volatility as the future price variation from the day on which an ISD value is estimated until contract expiration. ESTIMATING STOCK FUTURES INDEX VOI.ATILITY / 235

which states that t h e volatility of futures prices should increase as t h e contract approaches its maturity.

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