Download or read book Term Structure Forecasts of Volatility and Option Portfolio Returns written by Jim Campasano and published by . This book was released on 2018 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: I examine the predictability of equity implied volatility from the term structure, and find that forward volatility levels are biased predictors of future spot implied volatility. I construct options structures which proxy for forward volatility assets, and show that a long-short portfolio of forward volatility assets produce significantly profitable returns. As the construction of the trade is borne from a violation of an expectations hypothesis, the strategy is similar to the carry trade effected in foreign exchange and other assets. Unlike the returns to carry in foreign exchange and other assets, the forward volatility assets are not exposed to liquidity or volatility risks and negatively loads on market risk.