Evaluation of VI index forecasting model by machine learning for yahoo! stock BBS using volatility trading simulation

Abstract

The risk avoidance is very crucial in investment and asset management. One commonly used index as a risk index is the VI index. Suwa et al.(2017) analyzed stock bulletin board messages and predicted it rise. In our study, we developed a simulation of trading Nikkei stock index options using intra-day data and verified the validity of the VI index prediction model proposed by Suwa et al. In a period from November 18, 2014, to June 29, 2016, we conducted a simulation using a long straddle strategy. The profit and loss from trading with the instructions of their model was +3,021 yen. The benchmark's profit and loss was -3,590 yen. The improvement with their model was +6,611 yen. Therefore, we confirmed that Suwa et al.'s VI index prediction model might be effective.