We study the impact of volatility on intraday serial correlation, at time scales of less than 20 minutes, exploiting a data set with all transaction on SPX500 futures from 1993 to 2001. We show that, while realized volatility and intraday serial correlation are linked, this relation is driven by unexpected volatility only, that is by the fraction of volatility which cannot be forecasted. The im...

The aim of this paper is to price an American style option when there is uncertainty on the volatility of the underlying asset. An option contract can be either European or American style depending on whether the exercise is possible only at or also before the expiry date. A European option gives the holder the right to buy or sell the underlying asset only at the expiry date of the option. On ...

We propose robust numerical algorithms for pricing discrete variance options and volatility swaps under general time-changed Lévy processes. Since analytic pricing formulas of these derivatives are not available, some of the earlier pricing methods use the quadratic variation approximation for the discrete realized variance. While this approximation works quite well for long-maturity options on...

Forecasting volatility has received a great deal of research attention. Many articles have considered the relative performance of econometric model based and option implied volatility forecasts. While many studies have found that implied volatility is the preferred approach, a number of issues remain unresolved. One issue being the relative merit of combination forecasts. By utilising recent ec...

Given that jumps in the implied volatility index (VIX) lead to rapid changes level of volatility, they may contain significant predictive information for realized variance (RV) stock returns. Against this backdrop, present study proposes extend heterogeneous autoregressive (HAR) model using content time-varying occurring VIX. We find VIX have positive impacts on RV S&P 500 and proposed HAR-RV a...

Microstructure noise contaminates high-frequency estimates of asset price volatility. Recent work has determined a preferred sampling frequency under the assumption that the properties of noise are constant. Given the sampling frequency, the highfrequency observations are given equal weight. While convenient, constant weights are not necessarily efficient. We use the Kalman filter to derive mor...