Crude oil plays a crucial role in the international economy since it is considered a key commodity for all the international economies. In this study, we focus on forecasting oil volatility index (OVX), which is the market’s expectation of future oil volatility, by incorporating information from other asset classes. Due to the fact that many authors have applied the modeling framework used for forecasting realized volatility in forecasting implied volatility indices, we investigate whether this implementation is sufficient for the case of OVX or it fails to offer gains. The main results show that the forecasters should give more attention in the properties of the volatility time series and the fact that the predictive information from other asset classes should be extracted in a more accurate way.
The replication of the modeling framework used for oil realized volatility forecasting on OVX fails. What should be taken into consideration?