Recovering probabilistic information from option markets: Tests of distributional assumptions

Sherrick, Bruce J.; Garcia, Philip; Tirupattur, Viswanath

doi:10.1002/(sici)1096-9934(199608)16:5<545::aid-fut3>3.3.co;2-z

Cited by 25 publications

(19 citation statements)

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“…To extract the implied volatilities from the premiums, we approximate the RNVM by the lognormal distribution that has worked reasonably well for obtaining the implied volatilities in the soybean and other agricultural options markets (Fackler and King 1989;Sherrick, Garcia, and Tirupattur 1996). The discount factor b(T) is calculated by compounding the corresponding three-month T-Bill rate obtained from the Federal Reserve.…”

Section: Volatility Estimatesmentioning

confidence: 96%

“…Following Fackler and King (1989) and Sherrick, Garcia, and Tirupattur (1996), we assume no-arbitrage conditions and use Cox and Ross' (1976) description of options premiums as the discounted expected future payoffs against a risk-neutral valuation measure (RNVM) to characterize the price distribution of the underlying asset. Current premiums of European call and put options are given by where V c and V p are the premiums of European call and put options, x is the strike price, T is the time to expiration, F T is the price of the underlying asset at expiration, b(T) is the discount factor, and g(F T ) is the market expected probability density function of the underlying asset price F T at maturity.…”

Section: Volatility Estimatesmentioning

confidence: 99%

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The Term Structure of Implied Forward Volatility: Recovery and Informational Content in the Corn Options Market

Egelkraut

Garcia

Sherrick

2007

American J Agri Economics

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Using a flexible method, we develop the term structure of volatility implied by corn futures options with differing maturities, and evaluate its ability to predict subsequent realized price volatility. The implied forward volatilities anticipate realized volatility well. For the nearby interval, the implied forward volatilities provide unbiased forecasts, and are superior to forecasts based on historical volatilities. For more distant intervals, early-year options predict the direction and magnitude of future volatility changes about as well as a three-year moving average and better than a na�ve forecast. However, later-year options display less forecast power in part due to reduced trading activity. Copyright 2007, Oxford University Press.

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Section: Volatility Estimatesmentioning

confidence: 96%

Section: Volatility Estimatesmentioning

confidence: 99%

The Term Structure of Implied Forward Volatility: Recovery and Informational Content in the Corn Options Market

Egelkraut

Garcia

Sherrick

2007

American J Agri Economics

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“…Informative prices often translate directly into accurate forecasts of future events. For example, prices of financial options are good probability assessments of the future prices of the underlying assets [31]; prices in political stock markets, like the Iowa Electronic Market (IEM), 1 can furnish better estimates of likely election outcomes than traditional polls [11,12]; odds in horse races, determined solely by how much is bet on which horses, match very closely with the horses' actual frequencies of winning [1,30,32,33,35]; and point-spread betting markets yield unbiased predictions of sporting event outcomes [14]. Several studies demonstrate that, in a laboratory setting, markets are often able to aggregate information optimally [10,25,26,27].…”

Section: Collective Forecastsmentioning

confidence: 99%

Extracting collective probabilistic forecasts from web games

Pennock

Lawrence

Nielsen

et al. 2001

Proceedings of the Seventh ACM SIGKDD International Conference on Knowledge Discovery and Data Mining

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Game sites on the World Wide Web draw people from around the world with specialized interests, skills, and knowledge. Data from the games often reflects the players' expertise and will to win. We extract probabilistic forecasts from data obtained from three online games: the Hollywood Stock Exchange (HSX), the Foresight Exchange (FX), and the Formula One Pick Six (F1P6) competition. We find that all three yield accurate forecasts of uncertain future events. In particular, prices of so-called "movie stocks" on HSX are good indicators of actual box office returns. Prices of HSX securities in Oscar, Emmy, and Grammy awards correlate well with observed frequencies of winning. FX prices are reliable indicators of future developments in science and technology. Collective predictions from players in the F1 competition serve as good forecasts of true race outcomes. In some cases, forecasts induced from game data are more reliable than expert opinions. We argue that web games naturally attract well-informed and well-motivated players, and thus offer a valuable and oft-overlooked source of highquality data with significant predictive value. Categories and Subject DescriptorsH.2.8 [ D a t a b a s e M a n a g e m e n t ] : Database Applications--data mining; H.3.5 [ I n f o r m a t i o n Storage and Retrieval]: Online Information Systems--web-based services; J.4 [Comp u t e r A p p l i c a t i o n s ] : Social and Behavioral Sciences--economics; K.8 [ C o m p u t i n g Milieux]: Personal Computing-games

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“…[13] and kappa distribution in the meteorological literature ( [17], 18]). The Burr III distribution has been useful in financial literature, environmental studies, in survival and reliability theory, (such as: [1,7,10,14,19,26,27]). Recently, [25] proposed the use of the so-called extended Burr.…”

Section: Introductionmentioning

confidence: 99%

A New Class of Generalized Burr III Distribution for Lifetime Data

Kehinde¹

2018

IJSDA

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For the first time, the Generalized Gamma Burr III (GGBIII) is introduced as an important model for problems in several areas such as actuarial sciences, meteorology, economics, finance, environmental studies, reliability, and censored data in survival analysis. A review of some existing gamma families have been presented. It was found that the distributions cannot exhibit complicated shapes such as unimodal and modified unimodal shapes which are very common in medical field. The Generalized Gamma Burr III (GGBIII) distribution which includes the family of Zografos and Balakrishnan as special cases is proposed and studied. It is expressed as the linear combination of Burr III distribution and it has a tractable properties. Some mathematical properties of the new distribution including hazard, survival, reverse hazard rate function, moments, moments generating function, mean and median deviations, distribution of the order statistics are presented. Maximum likelihood estimation technique is used to estimate the model parameters and applications to real datasets in order to illustrate the usefulness of the model are presented. Examples and applications as well as comparisons of the GGBIII to the existing Gamma-G families are given.

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Recovering probabilistic information from option markets: Tests of distributional assumptions

Cited by 25 publications

References 0 publications

The Term Structure of Implied Forward Volatility: Recovery and Informational Content in the Corn Options Market

The Term Structure of Implied Forward Volatility: Recovery and Informational Content in the Corn Options Market

Extracting collective probabilistic forecasts from web games

A New Class of Generalized Burr III Distribution for Lifetime Data

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