Corpus ID: 18220694

Option trading strategies based on semi-parametric implied volatility surface prediction

  title={Option trading strategies based on semi-parametric implied volatility surface prediction},
  author={Francesco Audrino and Dominik Colangelo},
We propose constructing a set of trading strategies using predicted option returns for a relatively small forecasting period of ten trading days to form profitable hold-to-expiration, equally weighted, zero-cost portfolios based on 1-month at-the-money call and put options. We use a statistical machine learning procedure based on regression trees to accurately predict future implied volatility surfaces. Such accurate forecasts are needed to obtain reliable option returns used as trading signals… Expand

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