Implied correlation indices and volatility forecasting

Fink, Holger and Geppert, Sabrina (2017): Implied correlation indices and volatility forecasting. In: Applied Economics Letters, Vol. 24, No. 9: pp. 584-588

Abstract

Implied volatility indices are an important measure for market fear' and well-known in academia and practice. Correlation is still paid less attention even though the CBOE started to calculate implied correlation indices for the S&P500 in 2009. However, the literature especially on cross-country dependencies and applications is still quite thin. We are closing this gap by constructing an implied correlation index for the DAX and taking a deeper look at the (intercontinental) relationship between equity, volatility and correlation indices. Additionally, we show that implied correlation could improve implied volatility forecasting.

• Item Type: Journal article
• Faculties: Mathematics, Computer Science and Statistics > Statistics
• Subjects: 500 Science > 510 Mathematics
• ISSN: 1350-4851
• Language: English