p********0
发帖数: 186 | 1 Based on BS formula, we can deduct implied volatilty.
The implied volality is not constant, based on strike-price/time expiration
date, which construct a volatililty smile.
Then we can construct a binomial tree to fit the smile, and forecast stock
price/with a distribution.
Is it realistic to control the portfolio risk by minimize the implied
volatility?
Is implied volatility more accurate than historical volatility? | q********u
发帖数: 53 | 2 It does not sound reasonable to me. Implied Vol is used to measure option,
not stock vol. Any thoughts? | N***T
发帖数: 31 | | p********0
发帖数: 186 | 4 Option price not related to expected return, but determined by the implied
volatility, which is the second moment of the price return.
NYUTT, please kindly comments the rational behind the quick answer. | l**********t
发帖数: 5754 | 5 some elements in the implied vol surface (skewness) have return predictability.
see the latest CFA paper.
http://www.cfapubs.org/doi/abs/10.2469/faj.v66.n1.9 | d*******n
发帖数: 524 | 6 Not sure what you meant by "to control the portfolio risk by minimize the
implied volatility".
But in general, to estimate/understand/manage risk it's better to use
historical volatility, which is real-world vol, rather than implied
volatility, which is vol in risk-neutral prob space.
There is no such thing as one vol is more accurate than the other among hist
and implied vols. Implied vol is the collective opinion/guess of the option
traders on the volatility of the underlier. Whereas historica
【在 p********0 的大作中提到】
: Based on BS formula, we can deduct implied volatilty.
: The implied volality is not constant, based on strike-price/time expiration
: date, which construct a volatililty smile.
: Then we can construct a binomial tree to fit the smile, and forecast stock
: price/with a distribution.
: Is it realistic to control the portfolio risk by minimize the implied
: volatility?
: Is implied volatility more accurate than historical volatility?
| p********0
发帖数: 186 | 7 I heard the contrary to "Historical volatility is better than implied". A
prominent prof mentioned in his class said he tried GARCH/ARCH/ARMA
everything, but turn out to use the implied volatility which is more
accurate than the historical one.
Assume Implied volatioity is 100 percent accurate, than by minimize the
implied volatility for a portfolio means the future volatility is minized.
In case error is big(predication power is weak) then minimize doesnot mean
anything useful. | l**********t
发帖数: 5754 | 8 "From a theoretical perspective, hist vol and implied vol are in different
prob space" -- From a theoretical perspective, isn't vol kept invariant
during change of measure? | p*******g
发帖数: 25 | 9 The stock price is fundamentally determined by industry, company management,
company profits, company's growth, investor's expectation and so on. The
option on stock is derived from stock price and other factors and implied
volatility is even derived from the derived elements. So, if you have a
granson, can your grandson determine your future? This is my understanding.
expiration
【在 p********0 的大作中提到】
: Based on BS formula, we can deduct implied volatilty.
: The implied volality is not constant, based on strike-price/time expiration
: date, which construct a volatililty smile.
: Then we can construct a binomial tree to fit the smile, and forecast stock
: price/with a distribution.
: Is it realistic to control the portfolio risk by minimize the implied
: volatility?
: Is implied volatility more accurate than historical volatility?
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