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Options listing and the volatility of the underlying asset: a study on the derivative market function

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  • Chesney, Marc
  • Eid Júnior, William

Abstract

There are basic misunderstandings on derivative markets. Some professionals believe that they are a kind of casinos and have no utility for the investors. This work looks at the effects of options introductionin the Brazilian market, seeking for another benefit for this introduction: changes in the stocks risk leveI. Our results are the same found in the USand other markets: the options introduction reduces the stocks volatility.We also found that there is a slight indication that the volatility becames more stochastic with this alternative.

Suggested Citation

  • Chesney, Marc & Eid Júnior, William, 1996. "Options listing and the volatility of the underlying asset: a study on the derivative market function," RAE - Revista de Administração de Empresas, FGV-EAESP Escola de Administração de Empresas de São Paulo (Brazil), vol. 36(1), January.
    • Handle: RePEc:fgv:eaerae:v:36:y:1996:i:1:a:38043
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