Project information
Analysis of sentiment on derivative markets (ASDM)

The main goal of this project is to modify currently existing and established models for the prediction of market variance and returns of equities by including a variety of indicators based on option-implied information. Specifically, we focus on the Heterogeneous Autoregressive model of Realized Volatility (HAR-RV) and related specifications, augmented with option-based variables such as implied volatility aggregation and trading activity measures (put-call ratios, option volumes). The empirical analysis examines major index ETFs. We examine their ability to improve the forecasting power with emphasis on different expiration horizons, option moneyness, and other characteristics.