Modelling implied volatility with OLS and panel data models

A regression-based implied volatility model is developed that is based on implied volatility to predict future volatility. The implied volatility on time to maturity, the strike price and a dummy is regressed to empirically estimate the time-varying volatility with the use of Ordinary Least Squares regression, Error Components and Dummy Variable models. The implied volatility estimator developed is based on the FTSE 100 index European options.