Prediction and Analysis of Financial Volatility Based on Implied Volatility and GARCH Model

Journal: Modern Economics & Management Forum DOI: 10.32629/memf.v3i1.650

Feng Lin

Wenzhou Business Department of CITIC Futures Co. LTD, Wenzhou, 325000, Zhejiang, China

Abstract

Based on the data information of Shanghai and Shenzhen CSI 300 stock index futures, the performance of the GARCH model and implied volatility prediction in different time periods were studied. This paper mainly discusses the volatility of index returns and uses Matlab and Minitab to measure the performance of the GARCH model and implied volatility model in volatility prediction, and then comments on the prediction results. The results show that the GARCH model has a good prediction effect in the short term, while the implied volatility has a good prediction power in the long term. Option prices can mirror market information in a more comprehensive way. As a result, implied volatility is more reasonable to predict future volatility.

Keywords

Shanghai and Shenzhen options, GARCH model, implied volatility, conditional variance

References

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