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Options trading driven by volatility directional accuracy

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

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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.

Item Type: Journal Article
Journal or Publication Title: Emerald Management Reviews
Uncontrolled Keywords: Accuracy ; Financial Forecasting ; Greece ; Neural Networks ; Options
Subjects:
Departments: Lancaster University Management School > Management Science
ID Code: 44458
Deposited By: ep_importer_pure
Deposited On: 11 Jul 2011 19:16
Refereed?: Yes
Published?: Published
Last Modified: 08 Nov 2018 00:22
Identification Number:
URI: http://eprints.lancs.ac.uk/id/eprint/44458

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