The predictive power of the implied volatility of options traded OTC and on exchanges

Wayne W. Yu, Evans C.K. Lui, Wenjie Wang

Research output: Journal article publicationJournal articleAcademic researchpeer-review

38 Citations (Scopus)


This paper investigates the efficiency of stock index options traded over-the-counter (OTC) and on the exchanges in Hong Kong and Japan. Our findings suggest that implied volatility is superior to either historical volatility or a GARCH-type volatility forecast in predicting future volatility in both the OTC and exchange markets. This paper is also one of the first to compare the predictive power of the implied volatility of stock index options traded OTC to that of exchange-traded stock index options. Our evidence suggests that the OTC market is more efficient than the exchanges in Japan, but that the opposite is true in Hong Kong.
Original languageEnglish
Pages (from-to)1-11
Number of pages11
JournalJournal of Banking and Finance
Issue number1
Publication statusPublished - 1 Jan 2010


  • Historical volatility
  • Implied volatility
  • Index options
  • Over-the-counter
  • Predictive power

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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