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I'm trying to wrap my head around the reason one would make use of volatility forecasting?
I have read a few research papers implementing time series models and volatility indexes to forecast volatility. Is the idea of forecasting volatility and improving volatility forecasts purely academical or is there a place for it in practice.
Is it correct to say that it can improve VaR calculations if you use a your volatility parameter from a model that can forecast volatility better?
Will better volatility forecast models also be able to improve the pricing of options?
Thank you in advance for any help and input.
I have read a few research papers implementing time series models and volatility indexes to forecast volatility. Is the idea of forecasting volatility and improving volatility forecasts purely academical or is there a place for it in practice.
Is it correct to say that it can improve VaR calculations if you use a your volatility parameter from a model that can forecast volatility better?
Will better volatility forecast models also be able to improve the pricing of options?
Thank you in advance for any help and input.