Effectiveness of domain stabilization: A broader perspective

Lee, Geul, Chen, Jing ORCID: https://orcid.org/0000-0001-7135-2116 and Ryu, Doojin 2026. Effectiveness of domain stabilization: A broader perspective. International Review of Economics & Finance 105 , 104799. 10.1016/j.iref.2025.104799

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Abstract

This study evaluates the effectiveness of domain stabilization (DS) in mitigating the impact of truncation on model-free implied moment estimation in a new market context. Using refined daily data from the KOSPI200 options market, we address a research gap by linking implied moments to contemporaneous prices and market events. When DS is applied, implied moments more effectively explain contemporaneous underlying price levels and log returns. The in-sample return predictability and out-of-sample forecasting performance of implied moment estimates also improve with DS, albeit to a slightly lesser extent than observed in the U.S. market. Even in an emerging market, DS enhances the informational content of implied moment estimates, strengthening their explanatory power for underlying prices and returns as well as their predictive and forecasting capabilities.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Schools > Mathematics
Publisher:	Elsevier
ISSN:	1059-0560
Date of First Compliant Deposit:	13 January 2026
Date of Acceptance:	2 December 2025
Last Modified:	13 Jan 2026 13:45
URI:	https://orca.cardiff.ac.uk/id/eprint/183863

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