Implied Volatility vs. GARCH: A Comparison of Forecasts
Managerial Finance1995Vol. 21(10), pp. 59–73
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Abstract
In this paper we compare three types of forecasts of the volatility of equity returns series. The first is an historical estimate based on a simple sample standard deviation. A second is an estimate found by implying the volatility using the Black‐ Scholes formula. Finally, the third is an estimate obtained by forecasting with an estimated generalized autoregressive conditional heteroscedasticity (GARCH) model.
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