The term structure of implied forward volatility: Recovery and informational content in the corn options market

American Journal of Agricultural Economics

Volumn 89, Issue 1, 2007, Pages 1-11

  Egelkraut, Thorsten M ^a,b   Garcia, Philip ^a,b   Sherrick, Bruce J ^a,b  

^a OREGON STATE UNIVERSITY   (United States)

^b UNIVERSITY OF ILLINOIS AT URBANA CHAMPAIGN   (United States)

Author keywords

Corn options; Implied forward volatility; Informational content; Term structure

Indexed keywords

AGRICULTURAL ECONOMICS; AGRICULTURAL MARKET; AGRICULTURAL PRICE; ECONOMIC STRUCTURE; FORECASTING METHOD; MAIZE;

ZEA MAYS;

EID: 33846935542     PISSN: 00029092     EISSN: 14678276     Source Type: Journal    
DOI: 10.1111/j.1467-8276.2007.00958.x     Document Type: Article

References (34)

1. Anderson, R. 1985. "Some Determinants of the Volatility of Futures Prices." Journal of Futures Markets 5:331-48.
2. Anderson, T.G., and T. Bollerslev. 1998. "Answering the Skeptics: Yes, Standard Volatility Models Do Provide Accurate Forecasts." International Economic Review 39:885-905.
3. Black, F. 1976. "Studies of Stock Price Volatility Changes." In Proceedings of the 1976 Meetings of the American Statistical Association. Washington DC: Business and Economic Statistic Section, pp. 177-81.
4. Black, F., and M. Scholes. 1973. "The Pricing of Options and Corporate Liabilities." Journal of Political Economy 81:637-59.
5. Campa, M., and K. Chang. 1995. "Testing the Expectations Hypothesis on the Term Structure of Volatilities in Foreign Exchange Options." Journal of Finance 50:529-47.
6. Christensen, B.J., and N.R. Prabhala. 1998. "The Relation between Implied and Realized Volatility." Journal of Financial Economics 50:125-50.
7. Christoffersen, P.F., and F.X. Diebold. 2000. "How Relevant Is Volatility Forecasting for Financial Risk Management." Review of Economics and Statistics 82:12-22.
8. Claasen, M.M., and R.H. Shaw. 1970. "Water Deficit Effects on Corn II. Grain Components." Agronomy Journal 62:652-55.
9. Cox,. J.C., and S.A. Ross. 1976. "The Valuation of Options for Alternative Stochastic Processes." Journal of Financial Economics 3:145-66.
10. Cumby, R.E., and D.M. Modest. 1987. "Testing for Market Timing Ability." Journal of Financial Economics 19:169-89.
11. Day, T.E., and C.M. Lewis. 1993. "Forecasting Futures Market Volatility." Journal of Derivatives 1:33-50.
12. Egelkraut, T.M., P. Garcia, S.H. Irwin, and D.L. Good. 2003. "An Evaluation of Crop Forecast Accuracy for Corn and Soybeans: USDA and Private Information Agencies." Journal of Agricultural and Applied Economics 35:79-95.
13. Fackler, P.L., and R.P. King. 1989. "Calibration of Option-Based Probability Assessments in Agricultural Commodity Markets." American Journal of Agricultural Economics 72:73-83.
14. Fama, E.F. 1965. "The Behavior of Stock Market Prices." Journal of Business 38:34-105.
15. Fama, E.F. 1984. "The Information in the Term Structure." Journal of Financial Economics 13:509-28.
16. Figlewski, S. 1997. "Forecasting Volatility." Financial Markets. Institutions and Instruments 6:1-88.
17. Fleming, J. 1998. "The Quality of Market Volatility Forecasts Implied by S&P 100 Index Option Prices." Journal of Empirical Finance 5:317-45.
18. Goodwin, B.K., and R. Schnepf. 2000. "Determinants of Endogenous Price Risk in Corn and Wheat Futures Markets." Journal of Futures Markets 20:753-74.
19. Gwilym, O., and M. Buckle. 1997. "Forward/Forward Volatilities and the Term Structure of Implied Volatility." Applied Economics Letters 4:325-28.
20. Hartzmark, M.L. 1991. "Luck versus Forecast Ability: Determinants of Trader Performance in Futures Markets." Journal of Business 64:49-74.
21. Harvey, D., S. Leybourne, and P. Newbold. 1997. "Testing the Equality of Prediction Mean Squared Errors." International Journal of Forecasting 13: 281-91.
22. Harvey, D., S. Leybourne, and P. Newbold 1998. "Tests for Forecast Encompassing." Journal of Business and Economic Statistics 16:254-59.
23. Henriksson, R.D. 1984. "Market Timing and Mutual Fund Performance." Journal of Business 57:73-96.
24. Henriksson, R.D., and R.C. Merton. 1981. "On Market Timing and Investment Performance. II. Statistical Procedures for Evaluating Forecasting Skills." Journal of Business 54:513-33.
25. Holt, M.T., and G. Moschini. 1992. "Alternative Measures of Risk in Commodity Supply Models: An Analysis of Sow Farrowing Decisions in the United States." Journal of Agricultural and Resource Economics 17:1-12.
26. Hull, J., and A. White. 1987. "The Pricing of Options on Assets with Stochastic Volatilities." Journal of Finance 42:281-300.
27. Merton, R.C. 1973. "Theory of Rational Option Pricing." Bell Journal of Economics and Management Science 4:141-83.
28. Poon, S.H., and C.W.J. Granger. 2003. "Forecasting Volatility in Financial Markets: A Review." Journal of Economic Literature 41:478-539.
29. Poterba, J., and L. Summers. 1986. "The Persistence of Volatility and Stock Market Fluctuations." American Economic Review 76:1141-51.
30. Roll, R. 1977. "An Analytic Valuation Formula for Unprotected American Call Options on Stocks with Known Dividends." Journal of Financial Economics 5:251-58.
31. Shaw, R.H., and D.R. Laing. 1966. "Moisture Stress and Plant Response." In Plant Environment and Efficient Water Use, Agronomy Society of America, Madison, Wisconsin, pp. 73-94.
32. Sherrick, B.J., P. Garcia, and V. Tirupattur. 1996. "Recovering Probabilistic Information from Option Markets: Tests of Distributional Assumptions." Journal of Futures Markets 16:545-60.
33. Stein, J. 1989. "Overreactions in the Options Market." Journal of Finance 44:1011-23.
34. Tomek, W.G. 1997. "Commodity Futures Prices as Forecasts." Review of Agricultural Economics 19:23-44.