The Forecasting Performance of Liquidity-Adjusted Volatility Index

• Main Authors: Yun-Feng Hsieh, 謝昀峰
• Other Authors: 郭震坤
• Format: Others
• Language: zh-TW
• Published: 2013
• Online Access: http://ndltd.ncl.edu.tw/handle/86659718171746446310

碩士 === 國立臺灣大學 === 國際企業學研究所 === 101 === Options with same underlying asset, but different maturity months and strike prices trade simultaneously. It is conceivable that different liquidity among these options will have significant impact on option valuation. Low liquidity options may not be able to reflect market information fully, as high liquidity options do. As a result, the Implied Volatility (IV) calculated from these option prices will be full of noises. This study compares the performance of two liquidity weighted index: SVIX & TVVIX, where SVIX is an adjusted spread spectrum (spread-adjusted) volatility Index, and TVVIX is a trading volume index weighted by VIX. We use the weighted IV index as reference in forecasting futures market volatility to reduce noises of the high liquidity option IV, as suggested by Grover and Thomas (2012). The empirical results show that TVVIX has better performance than SVIX in forecasting TX volatility.