Forecasting Volatility - A Comparison Study of Model Based Forecasts and Implied Volatility
(2010) NEKM03 20101Department of Economics
- Abstract
- Purpose: The purpose is to investigate which of the selected models that forecasts the out-of-sample data most accurate and whether the model based estimators make better forecasts than the implied volatility.
Methodology: Trough in-sample data from a Swedish stock index return series and a exchange rate return series, different forecasting models are evaluated to see which one that predicts the out-of-sample realized volatility most accurate. The data is forecasted under different distribution assumptions and then evaluated against each other and the implied volatility.
Results: Trough this thesis, it can be concluded that the asymmetric EGARCH under general error distribution and under normal distribution most accurately describes... (More) - Purpose: The purpose is to investigate which of the selected models that forecasts the out-of-sample data most accurate and whether the model based estimators make better forecasts than the implied volatility.
Methodology: Trough in-sample data from a Swedish stock index return series and a exchange rate return series, different forecasting models are evaluated to see which one that predicts the out-of-sample realized volatility most accurate. The data is forecasted under different distribution assumptions and then evaluated against each other and the implied volatility.
Results: Trough this thesis, it can be concluded that the asymmetric EGARCH under general error distribution and under normal distribution most accurately describes the stock index return series and the exchange rate return series respectively. It can also be concluded that the implied volatility does not predict the volatility more accurate than the model based forecasts. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/1627421
- author
- Näsholm, Armin LU and Bunjaku, Bujar
- supervisor
- organization
- course
- NEKM03 20101
- year
- 2010
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- evaluation models , realized volatility, implied volatility, ARMA, ARCH-family, Volatility forecast
- language
- English
- id
- 1627421
- date added to LUP
- 2010-07-06 08:20:19
- date last changed
- 2010-07-06 08:20:19
@misc{1627421, abstract = {{Purpose: The purpose is to investigate which of the selected models that forecasts the out-of-sample data most accurate and whether the model based estimators make better forecasts than the implied volatility. Methodology: Trough in-sample data from a Swedish stock index return series and a exchange rate return series, different forecasting models are evaluated to see which one that predicts the out-of-sample realized volatility most accurate. The data is forecasted under different distribution assumptions and then evaluated against each other and the implied volatility. Results: Trough this thesis, it can be concluded that the asymmetric EGARCH under general error distribution and under normal distribution most accurately describes the stock index return series and the exchange rate return series respectively. It can also be concluded that the implied volatility does not predict the volatility more accurate than the model based forecasts.}}, author = {{Näsholm, Armin and Bunjaku, Bujar}}, language = {{eng}}, note = {{Student Paper}}, title = {{Forecasting Volatility - A Comparison Study of Model Based Forecasts and Implied Volatility}}, year = {{2010}}, }