How to predict short-term volatility in stock market

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Volatility is one of the most prominent terms you'll hear on any trading floor. In financial markets, volatility captures the amount of fluctuation in prices. High volatility is associated to periods of market turbulence and to large price swings, while low volatility describes more calm and quiet markets. For a market making firm in options, accurately predicting volatility is essential for the trading of options whose price is directly related to the volatility of the underlying asset. Realized volatility can mean the difference between losing and winning.

What factors would you use to build a model to optimize how to predict short-term volatility in stock market.

What factors would you use to build a model to optimize how to predict short-term volatility in foreign exchange market.

(with explanation)

Reference no: EM133074981

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