Use of the Implied Standard Deviation as a Predictor of Future Stock Price Variability: A Review of Empirical Tests

摘要

The paper discusses the use of implied standard deviations (ISDs) as predictors of future stock price variability. The ISD is the standard deviation that results if the market price of the option is equated to its model price. There are two limitations. First it only considers ISDs derived from the Black and Scholesmodel or a dividend-adjusted version of this model. The second limitation is that it only considers ISDs derived from call-option prices.