A random walk down the options market
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George J. Jiang; Yisong S. Tian
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Article
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2011
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John Wiley and Sons
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English
โ 399 KB
Under the efficient market hypothesis, option-implied forward variance forms a martingale and changes in forward variance follow a random walk. In this study, we extract forward variance from option prices following a model-free approach and empirically test the random walk hypothesis. Although resu