Term Structure Analysis of Option Implied Volatility in the Brazilian Market

Download or read book Term Structure Analysis of Option Implied Volatility in the Brazilian Market written by Carlos Heitor Campani and published by . This book was released on 2017 with total page 14 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper aims at predicting the volatility term structure of a given asset. The model is based on the GARCH modeling of the asset's volatility, from which the term structure is derived. We test if the model is able to accommodate the term structure response to volatility shocks. Using data from two important Brazilian companies, the model indeed improved standard predictions for the volatility term structure by relating the size of the volatility shock to the maturity of the option used to estimate the asset's volatility.