Yes, implied volatilities are not informationally efficient: an empirical estimate using options on interest rate futures contracts

Giulio, Cifarelli (2004): Yes, implied volatilities are not informationally efficient: an empirical estimate using options on interest rate futures contracts. Published in: Studi e Discussioni Dipartimento di Scienze Economiche Università di Firenze No. n. 137 (February 2004)

Abstract

The accuracy of volatility forecast estimators has been assessed using daily overlapping and non overlapping observations on two major short-term interest rate futures contracts traded in London. The use of a panelized data set has eliminated some of the drawbacks usually associated with non overlapping data estimation, such as the lack of accuracy due to an insufficient number of observations or the arbitrariness of the choice of tenor. In the same way non stationarity and long memory characteristics of daily overlapping time series are disposed of. Information content estimation in levels associated with the Hansen (1982) variance covariance matrix estimator provides reasonably accurate estimates, broadly similar to the corresponding benchmark panel data ones.

• Item Type: MPRA Paper
• Language: English
• Keywords: Options; stochastic volatility; panel data analysis
• Subjects: G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency ; Event Studies ; Insider Trading; C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C23 - Panel Data Models ; Spatio-temporal Models; C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes

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