Implicit expectiles and measures of implied volatility

Abstract

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 data-set of closing daily prices of FTSE MIB index options. We introduce the interexpectile difference , for , 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. We also discuss a theoretical comparison with implicit VaR and CVaR introduced in Barone Adesi [J. Risk Financ. Manage., 2016, 9].

Keywords:

• Implied volatility
• VIX index
• Expectiles
• Interexpectile difference

JEL Classification:

• C00
• C02
• C53
• G31

Acknowledgements

The authors would like to thank the Editor and two anonymous referees for many useful comments and suggestions.

Disclosure statement

No potential conflict of interest was reported by the authors.