Volatilities implied by price changes in the S&P 500 options and futures contracts
- First Online:
- Cite this article as:
- Hilliard, J. & Li, W. Rev Quant Finan Acc (2014) 42: 599. doi:10.1007/s11156-013-0354-z
- 342 Downloads
We develop a new volatility measure: the volatility implied by price changes in option contracts and their underlying. We refer to this as price-change implied volatility. We compare moneyness and maturity effects of price-change and implied volatilities, and their performance in delta hedging. We find that delta hedges based on a price-change implied volatility surface outperform hedges based on the traditional implied volatility surface when applied to S&P 500 future options.