Read full paper at: http://www.scirp.org/journal/PaperInformation.aspx?PaperID=53601#.VMnrHizQrzE Author(s) Jingfei Cheng Affiliation(s) Department of Finance, School of Economics, Shanghai University, Shanghai, China . ABSTRACT Volatility is an important variable in the financial market. We propose a model-free implied volatility method to measure the volatility and test the volatility risk premium. The model-free implied volatility does not depend on the option pricing model, and extracts information from all the option contracts. We provide empirical evidence from the S & P 500 index option that model-free implied volatility is more accurate to forecast the future volatility and the volatility risk premium does not exist. KEYWORDS Model-Free Implied Volatility , Volatility Forecasting , Volatility Risk Premium Cite this paper Cheng, J. (2015) Volatility Forecasting and Volatility Risk Premium. Journal of Applied Mathematics...
Scientific Research Publishing