On the information content of volatility, skewness and kurtosis implied in option prices

• Autores: Gregorio Serna
• Localización: Documentos de Trabajo ( Universidad de Castilla La Mancha. Facultad de Ciencias Económicas y Empresariales ), Serie 1, Nº. 6, 2001, 44 págs.
• Idioma: inglés
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• Resumen

  • This work analyzes the information content of volatility, skewness and kurtosis implied in option prices, using the formula by Corrado and Su (1996; 1997a; 1997b). The database is composed of all call and put options on the Spanish IBEX-35 index futures traded daily during the 45-minute interval from 16:00 to 16:45 from January 1994 to October 1998. The information content of implied parameters is assessed using simple regression procedures along the lines suggested by Christensen and Prabhala (1998) and the GARCH approach by Amin and Ng (1997). Both Black and Scholes (1973) and Corrado and Su implied volatility contain information (beyond that contained in historical volatility) about future volatility, although they seem to be biased and inefficient. Finally Corrado and Su implied skewness and kurtosis do not seem to contain information about future realized skewness and kurtosis respectively (neither do historical forecasts of skewness and kurtosis).