The Stochastic Behaviour of Market Variance Implied in the Prices of Index Options
AbstractThe purpose of this paper is to examine the time series properties of volatilities, and to consider various financial and real variables that may be correlated with innovations in expected volatility. The measure used in this study is the Black-Scholes volatility implied in weekly call option prices written on the spot price of the FTSE Index, a U.K. market equity index. First the authors determine if capital structure can explain the relation between changes in the volatility of equity and structure can explain the relation between changes in the volatility of equity and changes in the level of the index. Second, they analyze whether innovations in the volatilities of prices of real variables could also explain changes in equity volatility, including the volume of transactions in equities, oil prices, exchange rates, nominal and real interest rates, and inflation. Copyright 1991 by Royal Economic Society.
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Bibliographic InfoArticle provided by Royal Economic Society in its journal The Economic Journal.
Volume (Year): 101 (1991)
Issue (Month): 409 (November)
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- David Heath & Eckhard Platen, 2004.
"Understanding the Implied Volatility Surface for Options on a Diversified Index,"
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- David Heath & Eckhard Platen, 2004. "Understanding the Implied Volatility Surface for Options on a Diversified Index," Research Paper Series 128, Quantitative Finance Research Centre, University of Technology, Sydney.
- David Heath & Eckhard Platen, 2003.
"Pricing of Index Options Under a Minimal Market Model with Lognormal Scaling,"
Research Paper Series
101, Quantitative Finance Research Centre, University of Technology, Sydney.
- David Heath & Eckhard Platen, 2003. "Pricing of index options under a minimal market model with log-normal scaling," Quantitative Finance, Taylor & Francis Journals, vol. 3(6), pages 442-450.
- Wagner, Niklas & Szimayer, Alexander, 2004. "Local and spillover shocks in implied market volatility: evidence for the U.S. and Germany," Research in International Business and Finance, Elsevier, vol. 18(3), pages 237-251, September.
- Georgios Chalamandaris & Andrianos Tsekrekos, 2013. "Explanatory Factors and Causality in the Dynamics of Volatility Surfaces Implied from OTC Asian–Pacific Currency Options," Computational Economics, Society for Computational Economics, vol. 41(3), pages 327-358, March.
- Jose Noguera, 2001.
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- David S. Bates, 1997. "Post-'87 Crash Fears in S&P 500 Futures Options," NBER Working Papers 5894, National Bureau of Economic Research, Inc.
- Gerard L. Gannon, 2009. "Dispersion of Information or Market Behaviour: General Public Trading in S&P500 Index Futures," Accounting, Finance, Financial Planning and Insurance Series 2009_01, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
- Cifarelli, giulio, 2002. "The information content of implied volatilities of options on eurodeposit futures traded on the LIFFE: is there long memory?," MPRA Paper 28538, University Library of Munich, Germany.
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