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<!DOCTYPE article PUBLIC "-//NLM//DTD JATS (Z39.96) Journal Publishing DTD v1.3 20210610//EN" "https://jats.nlm.nih.gov/publishing/1.3/JATS-journalpublishing1-3.dtd">
<article article-type="research-article" dtd-version="1.3" xml:lang="ru">
  <front xmlns:xlink="http://www.w3.org/1999/xlink">
    <journal-meta>
      <journal-title-group>
        <journal-title>π-Economy</journal-title>
        <trans-title-group xml:lang="ru">
          <trans-title>π-Economy</trans-title>
        </trans-title-group>
      </journal-title-group>
      <issn pub-type="epub">2782-6015</issn>
    </journal-meta>
    <article-meta xmlns:xlink="http://www.w3.org/1999/xlink">
      <article-id pub-id-type="publisher-id">9</article-id>
      <article-id pub-id-type="doi">10.18721/JE.15209</article-id>
      <title-group>
        <article-title>Development of high-frequency volatility estimators in pricing and trading stock options</article-title>
        <trans-title-group xml:lang="ru">
          <trans-title>Развитие методов оценки волатильности доходности при ценообразовании и торговле фондовыми опционами</trans-title>
        </trans-title-group>
      </title-group>
      <contrib-group>
        <contrib contrib-type="author">
          <name>
            <surname>Gayomey</surname>
            <given-names>John</given-names>
          </name>
        </contrib>
        <contrib contrib-type="author">
          <name>
            <surname>Zaytsev</surname>
            <given-names>Andrey</given-names>
          </name>
        </contrib>
      </contrib-group>
      <pub-date publication-format="electronic" date-type="pub" iso-8601-date="2022-04-28">
        <day>28</day>
        <month>04</month>
        <year>2022</year>
      </pub-date>
      <volume>15</volume>
      <issue>2</issue>
      <fpage>130</fpage>
      <lpage>147</lpage>
      <self-uri xmlns:xlink="http://www.w3.org/1999/xlink" content-type="pdf" xlink:href="https://economy.spbstu.ru/userfiles/files/articles/2022/2-2022/09_Gayomey%2C-Zaytsev.pdf"/>
      <abstract xml:lang="en">
        <p>Asset return volatility plays a key role in derivative pricing and hedging, risk management and portfolio allocation decisions. This study examined the economic benefit of high-frequency volatility estimators (measures realized) in option pricing and trading. We evaluated the forecasting ability of high-frequency volatility estimators based on the profits that option dealers would derive from trading on the basis of alternative high-frequency volatility forecasts. To this end, we traded European call and put options on Bank of America, Coca-Cola and Microsoft stocks for a period of 24 trading days using high-frequency volatility-based option trading strategies. The study results show that the realized kernel estimators for Bank of America stock options were the only volatility estimators that earned a positive profit from trading (a profit of $20.42 per option over a period of 24 trading days). For Coca-Cola stock options, the best volatility estimator turned out to be the two-time scale covariance estimator. It earned a total profit of $26.88 per option during the same period. For Microsoft stock options, the preferred volatility estimator was the Range-based realized variance estimator. It outperformed all the other competing estimators with a total profit of $54.07 per option which was significantly greater than the profits of the other estimators. It was concluded that high-frequency volatility forecasts by the realized kernel, two-time scale realized variance and realized range-based variance estimators yield accurate volatility forecasts and are very useful in pricing and trading Bank of America, Coca-Cola and Microsoft stock options, respectively.</p>
      </abstract>
      <kwd-group xml:lang="en">
        <kwd>Volatility</kwd>
        <kwd>realized volatility</kwd>
        <kwd>realized measures</kwd>
        <kwd>high-frequency volatility forecast</kwd>
        <kwd>HAR model</kwd>
        <kwd>Black-Scholes-Merton model</kwd>
        <kwd>option trading strategies</kwd>
      </kwd-group>
    </article-meta>
  </front>
</article>
