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Implicit Volatility versus Statistical Volatility: an Exercise Using Options and Telemar S.A. Stock

Author

Listed:
  • João Gabe

    (Banco do Brasil e UPIS Faculdades Integradas)

  • Marcelo Savino Portugal

    (PPGE/UFRGS)

Abstract

The main goal this article was to find the best way of making forecast about future volatility using implicit or statistic forecast. The work is based on Telemar S.A. shares data from 21/09/1998 to 21/10/2002 and Telemar S.A. shares data from 2/10/2000 to 21/10/2002. The implicit volatility was obtained using back-out procedure from the Black-Scholes model. The statistics forecasts were obtained using weighted moving average models, GARCH, EGARCH and FIGARCH models. The Wald statistic shows that EGARCH and FIGARCH models are efficient and are not biased forecasts for Telemar S.A. absolute variation between t and t + 1. The volatility evaluation during the maturity time of an option, rejects the hypothesis that implicit volatility is the best forecast to future volatility and the Wald statistic show that FIGARCH model is an efficient and not biased forecast.

Suggested Citation

  • João Gabe & Marcelo Savino Portugal, 2004. "Implicit Volatility versus Statistical Volatility: an Exercise Using Options and Telemar S.A. Stock," Brazilian Review of Finance, Brazilian Society of Finance, vol. 2(1), pages 47-73.
    • Handle: RePEc:brf:journl:v:2:y:2004:i:1:p:47-73
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    More about this item

    Keywords

    volatility; options; conditional variance; FIGARCH; Black-Scholes;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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