Q4 (10 Marks) Using a large sample of S&P500 returns up to your option trade date to fit a volatility model and use this model to forecast volatility over the lifetime of the option. Compare this estimate to the realised volatility of the index over the time to expiry. Compare your volatility forecast to the option implied volatility, based on any difference, construct an option spread to trade volatility using any subset of options from the full traded set on your date. Report the cost of the portfolio, the value on expiry and the P&L. Comment on your results. Q5 (10 Marks) Q4 (10 Marks) Using a large sample of S&P500 returns up to your option trade date to fit a volatility model and use this model to forecast volatility over the lifetime of the option. Compare this estimate to the realised volatility of the index over the time to expiry. Compare your volatility forecast to the option implied volatility, based on any difference, construct an option spread to trade volatility using any subset of options from the full traded set on your date. Report the cost of the portfolio, the value on expiry and the P&L. Comment on your results. Q5 (10 Marks)