Implied volatility modeling and forecasting: evidence from China Available to Purchase

Testing several approaches for implied volatility modeling and forecasting.

Comparative empirical study with four traded options.

Non-parametric higher-order spline is better than parametric stochastic volatility inspired (SVI) in China.

Our results imply that even though popular on Wall Street, SVI seems not to be utilized by traders and market-makers in China.

Traders may consider higher-order spline as a better method for implied volatility modeling and forecasting.

Propose to model and forecast implied volatility via the fifth-order spline interpolation as a first; initiates studies of the empirical performance of SVI and the fifth-order spline models in implied volatility modeling and forecasting.