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What are the "best practice" models that quant firm that trades options would use to "predict" (let's say SP500) implied vol, that they integrate into their decision making?

Do they look at the VIX futures curve? There are a couple of papers claiming that it has significant predictive power.

Do they use GARCH or similar univariate models?

Or they don't really try to do model-based volatility forecasts other than the well-known "factors" like the post–earnings-announcement drift?

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  • $\begingroup$ i am sure that if anyone knew what top quant firms do in any regards, they would not be here ;-) $\endgroup$ Jan 12 at 8:17

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