Implicit Expectiles and Measures of Implied Volatility
19 Pages Posted: 6 Sep 2017 Last revised: 7 May 2018
Date Written: May 2018, 2017
We show how to compute the expectiles of the risk neutral distribution from the prices of European call and put options. Empirical properties of these implicit expectiles are studied on a dataset of closing daily prices of FTSE MIB index options. We introduce the interexpectile difference Δτ (X) := eτ (X) - e1-τ (X), for τ ∈ (1/2,1], and suggest that it is a natural measure of the variability of the risk neutral distribution.
We investigate its theoretical and empirical properties and compare it with the VIX index computed by CBOE and with implicit VaR and CVaR introduced in Barone Adesi (2016).
Keywords: Implied Volatility; VIX Index; Expectiles; Interexpectile difference
JEL Classification: C00; C02; C53; G31
Suggested Citation: Suggested Citation