Real-world equity calibration. A comparison of realised and expected volatility
Archive Notice
This article has been archived and has been superseded by a more recent document. Please use the links to the left to browse our most up-to-date information.
Document ID: 2009-1330 (previously 2009/04)
Published on: 16th April 2009
Author: Frederic El Cherif
In this note we assume that a volatility estimate based on 21 day equity return observations is an appropriate estimator of realised volatility over a month and ask the following question: which volatility measure provides the best forecast of volatility over the next month? We compare three commonly used measures of expected volatility: a) a univariate GARCH estimator, b) adjusted option implied equity volatility and c) an exponentially weighted moving average estimator which attaches more weight to more recent observations.
This document has been replaced with a more recent version -- click here to see the updated document
