IDEAS home Printed from https://ideas.repec.org/a/eee/finana/v67y2020ics1057521919303187.html
   My bibliography  Save this article

Asymmetric implied market volatility and terrorist attacks

Author

Listed:
  • Bevilacqua, Mattia
  • Morelli, David
  • Uzan, Paola Sultana Renée

Abstract

This paper studies the impact of terrorism on implied volatility in the U.S. financial market via an event study methodology. We decompose the options-based and forward looking VIX index into its negative (VIX−) and positive (VIX+) components, extracted only from put options and call options, respectively. This decomposition of the VIX index allows us to better investigate the asymmetric impact of terrorist attacks on implied volatility from the puts and calls channels separately. Our study finds evidence of a greater impact of terror detected for the puts channel of VIX, namely VIX−. We further show that events that occur within the U.S. appear to impact both VIX and VIX− in a similar way, whereas international terrorist attacks show a greater impact on the puts component, VIX−. The calls component, VIX+, is found to be mainly detached from terrorist attacks.

Suggested Citation

  • Bevilacqua, Mattia & Morelli, David & Uzan, Paola Sultana Renée, 2020. "Asymmetric implied market volatility and terrorist attacks," International Review of Financial Analysis, Elsevier, vol. 67(C).
    • Handle: RePEc:eee:finana:v:67:y:2020:i:c:s1057521919303187
    DOI: 10.1016/j.irfa.2019.101417
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1057521919303187
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.irfa.2019.101417?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bevilacqua, Mattia & Morelli, David & Uzan, Paola Sultana Renée, 2021. "Striking the implied volatility of US drone companies," International Review of Financial Analysis, Elsevier, vol. 77(C).
    2. Liu, Qing & Wang, Shouyang & Sui, Cong, 2023. "Risk appetite and option prices: Evidence from the Chinese SSE50 options market," International Review of Financial Analysis, Elsevier, vol. 86(C).
    3. Omar, Ayman M.A. & Lambe, Brendan J & Wisniewski, Tomasz Piotr, 2021. "Perceptions of the threat to national security and the stock market," Journal of Economic Behavior & Organization, Elsevier, vol. 186(C), pages 504-522.
    4. Le, Anh-Tuan & Tran, Thao Phuong, 2021. "Does geopolitical risk matter for corporate investment? Evidence from emerging countries in Asia," Journal of Multinational Financial Management, Elsevier, vol. 62(C).
    5. Lin Chen & Fengyun Mu, 2021. "Spatiotemporal characteristics and driving forces of terrorist attacks in Belt and Road regions," PLOS ONE, Public Library of Science, vol. 16(3), pages 1-24, March.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finana:v:67:y:2020:i:c:s1057521919303187. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/620166 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.