Forward at the Money Forward Implied Volatility and Forward Underlying Move Estimations

Abstract

Ahead of the 23rd June UK referendum on "Brexit", this note provides a technique for estimating the Forward (at referendum date) At The Money Forward (ATMF) implied volatility for equity or FX Indexes. We provide a closed form formula for the forward underlying expected moves (for short terms maturities) post the referendum date. We provide a closed form formula for the forward underlying expected moves conditional to the adverse event (vote in favour of 'leaving' the European Union (EU) area) happening. We finally provide a closed form formula for the forward underlying expected moves conditional to the adverse event not happening. More generally the framework here can be used to estimate forward implied volatility and forward asset price moves post a potentially adverse event to come in the future.