Implied volatility surface predictability: The case of commodity markets

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)
134 Downloads (Pure)


Recent literature seek to forecast implied volatility derived from equity, index, foreign exchange, and interest rate options using latent factor and parametric frameworks. Motivated by increased public attention borne out of the financialization of futures markets in the early 2000s, we investigate if these extant models can uncover predictable patterns in the implied volatility surfaces of the most actively traded commodity options between 2006 and 2016. Adopting a rolling out-of-sample forecasting framework that addresses the common multiple comparisons problem, we establish that, for energy and precious metals options, explicitly modeling the term structure of implied volatility using the Nelson-Siegel factors produces the most accurate forecasts.
Original languageEnglish
Article number105657
JournalJournal of Banking & Finance
Early online date24 Sep 2019
Publication statusPublished - 01 Nov 2019


Dive into the research topics of 'Implied volatility surface predictability: The case of commodity markets'. Together they form a unique fingerprint.

Cite this