Does implied volatility contain information about future volatility? Evidence from the Petrobras options market | Zendy

José Valentim Machado Vicente | Zendy; Tiago de Sousa Guedes | Zendy

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Does implied volatility contain information about future volatility? Evidence from the Petrobras options market

Author(s) -

José Valentim Machado Vicente,

Tiago de Sousa Guedes

Publication year - 2010

Publication title -

brazilian business review

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.176

H-Index - 4

ISSN - 1808-2386

DOI - 10.15728/bbr.2010.7.1.3

Subject(s) - implied volatility , volatility (finance) , volatility smile , volatility swap , volatility risk premium , economics , financial economics , variance swap , monetary economics , econometrics

The aim of this work is to study the relationship between implied and realized volatilities. For this purpose, we analyze the markets of Petrobras stocks and calls between January 2006 and December 2008. Regression analysis with no overlapping monthly data of in-the-money, at-the-money and out-of-the-money calls indicates that the implied volatility of out-of-the-money options contains more information about future volatility than does historical volatility. On the other hand, the implied volatility of the in-the-money and at-the-money calls has poor explanatory

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