forward vol

Hi Martinghoul,

Quote from Martinghoul:

MAW, I have been trying to find some specific stuff on the matter. I have found a few links, but they don't address the question specifically (there's a few papers that talk about it on JStor, but I can only see abstracts).

My understanding of this is that calculation of standard deviation as a square root of variance has all sorts of issues, especially in the presence of autocorrelation.

I see your point, but the fact that there are autocorrelation and/or vol of vol doesn't change forward vol. Forward vol is correct just for the moment one derives it. It's a weak way to forecast future volatility but it has to hold since everybody prices volty by the variance.

Masteratwork
 
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