The real options approach to valuation - Haskayne School of Business
The real options approach to valuation - Haskayne School of Business
The real options approach to valuation - Haskayne School of Business
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Procedure • We fac<strong>to</strong>r analyze the covariance matrix <strong>of</strong> the futures returns and retain the first three principal components (PCs) • Regress straddle returns (changes in implied vola*li*es) on PCs and PCs squared • We find that the R2 are typically very low, especially for the implied vola*lity regressions (between 0 and 21%)