Maris, K. and Nikolopoulos, Konstantinos and Giannelos, K. and Assimakopoulos, V. (2006) Options trading driven by volatility directional accuracy. Emerald Management Reviews, 39 (1). pp. 253-260. ISSN 1474-6085
Full text not available from this repository.Abstract
Purpose - To use efficient volatility direction forecasts for option trading. Design/methodology/approach - Presents an option trading methodology as a flow chart. Bases it on weekly closing values , and calculates historical volatility series using both a naïve forecast and a 13 week moving average forecast. Combines in a two-layer artificial neural network (ANN)with back-propagation. Adds an Imply Volatility Series, and forecasts one period ahead. Applies to the CAC 40, DAX and Greek FTSE/ASE 20, rolling 26 one-week forecasts. Findings - Finds the combined method provided much more accurate forecasts and a profit over 26 weeks. However, notes some simpler ,methods yielded higher profits. Research limitations/implications - Proposes research into more accurate directional predictions, limited to those over specific margins. Adds the need to use daily data. Originality/value - Presents an apparently simple method of forecasting the direction of volatility.