HISTORICAL AND IMPLIED VOLATILITIES: A REVIEW OF METHODOLOGY
HISTORICAL AND IMPLIED VOLATILITIES: A REVIEW OF METHODOLOGY

Summary/Abstract: Volatility is a subject of numerous studies. Many of them focus on predictive power of different sources of volatility. Most often, the Black-Scholes implied volatility is believed to outperform historical volatility, although some research demonstrates that implied volatility is a biased forecast of future volatility. Taken into account different opinions, the paper aims at presenting alternative methods for estimating volatility.

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