Author(s)

Yue Zhao

Corresponding Author

Yue Zhao

ABSTRACT

Volatility forecasting has a critical role in pricing options. The paper compares different models on projection theoretically and then discusses the process of conducting derivational HAR-RV models selected. The core of the models is established under the concept of realised volatility based on high-frequency data, which provides more accurate and precise values. Nowadays, HAR-RV is the most commonly used model to predict volatility. The review gives an insight into the difference between models and within the HAR-RV model group. In addition, the paper also proposes potential developing and improving paths. The research on volatility forecasting should be advanced uninterruptedly, since volatility is a decisional part of the option.

KEYWORDS

Volatility forecasting, Realised volatility, GARCH model, HAR-RV model