On this paper, various volatility estimation methods were compared to examine which one is the most appropriate method to measure and to predict KOSPI200 index volatility especially for the index options. Among the various methods, historical, implied, EWMA and GARCH(1,1) were selected to verify their prediction power for the period, July 17, 1997 to September 31, 2000 in which KOSPI200 index options have been traded in Korea market. To verify the power of prediction, RMSE and expected risk excess ratio method were used. As a result, EWMA showed the most stable in both testing methods but this EWMA model’s prediction was only to follow the mean volatility of realized KOSPI200 index. On the contrary, GARCH(1,1) model showed poor result by the test methods used in this paper but in some sense of prediction, GARCH(1,1) prediction of the change of volatility direction gave a valuable information.
