Forecasting the realized volatility based on information extracted from the ross recovery theorem
- Authors: Patlasov D.A.1
-
Affiliations:
- Perm State University
- Issue: No 114 (2025)
- Pages: 229-253
- Section: Control of social-economic systems
- URL: https://journals.rcsi.science/1819-2440/article/view/291941
- ID: 291941
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Abstract
This article discusses an approach to predicting the realized volatility of the S&P 500 index using data extracted from options due to the Ross recovery theorem. The purpose of this study is to investigate the possibility of using the indicators obtained after applying the Ross recovery theorem as exogenous factors in the forecasting model of realized volatility of financial instruments. The methodology used to achieve the research objective eliminates the need to use historical quotations of financial assets, focusing solely on options. The paper compares the accuracy of forecasting realized volatility between the proposed models and the basic HAR-RV approach. Empirical results have shown that the proposed approach provides a higher accuracy of predictions. The approach used in the Ross recovery theorem based on the approximation of the distribution density function of the underlying option asset allows for more accurate consideration of market participants' expectations and their risk preferences, which can become statistically significant factors in forecasting models of various financial indicators. The results of the study can be used to assess systematic risk, predict the likelihood of corrections and crises in financial markets.
About the authors
Dmitry Aleksandrovich Patlasov
Perm State University
Email: dmitriypatlasov@gmail.com
Perm
References
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