S&P 100 index option volatility
Article Abstract:
Using transaction data on the S&P 100 index options, we study the effect of valuation simplifications that are commonplace in previous research on the time-series properties of implied market volatility. Using an American-style algorithm that accounts for the discrete nature of the dividends on the S&P 100 index, we find that spurious negative serial correlation in implied volatility changes is induced by nonsimultaneously observing the option price and the index level. Negative serial correlation is also induced by a bid/ask price effect if a single option is used to estimate implied volatility. In addition, we find that these same effects induce spurious (and unreasonable) negative cross-correlations between the changes in call and put implied volatility. (Reprinted by permission of the publisher.)
Publication Name: Journal of Finance
Subject: Business
ISSN: 0022-1082
Year: 1991
User Contributions:
Comment about this article or add new information about this topic:
Liquidity of the CBOE equity options
Article Abstract:
We examine the CBOE option market depth and bid-ask spreads. Absence of price effects surrounding large option trades suggests excellent market depth. However, bid-ask spreads for the CBOE options and the NYSE stocks are nearly equal, even though an average option is equivalent to less than half a stock plus borrowing. We explain this tradeoff between market depth and bid-ask spreads on the CBOE and the NYSE by differences in market mechanisms. We also show that the adverse-selection component of the option spread, which measures the extent of information-related trading on the CBOE, is very small. (Reprinted by permission of the publisher.)
Publication Name: Journal of Finance
Subject: Business
ISSN: 0022-1082
Year: 1990
User Contributions:
Comment about this article or add new information about this topic:
Intraday price change and trading volume relations in the stock and stock option markets
Article Abstract:
This study investigates intraday relations between price changes and trading volume of options and stocks for a sample of firms whose options traded on the CBOE during the first quarter of 1986. After purging the price change series of the effects of bid/ask spreads, multivariate time-series analysis is used to estimate the lead/lag relation between the price changes in the option and stock markets. The results indicate that price changes in the stock market lead the option market by as much as fifteen minutes. The analysis of trading volume indicates that the stock market may be even longer. (Reprinted by permission of the publisher.)
Publication Name: Journal of Finance
Subject: Business
ISSN: 0022-1082
Year: 1990
User Contributions:
Comment about this article or add new information about this topic:
- Abstracts: IASB is on its way. Battle of the regulators. Coping with compliance
- Abstracts: Support for choosing futures and options strategies. Anatomy of the great treasury workstation fizzle
- Abstracts: Duration matching offers hedge against pension volatility. New round of changes adds headaches for defined benefit plans
- Abstracts: Plant after Wimpy. Extracting value from the family company. The new kid in town
- Abstracts: The limits of arbitrage. Liquidation values and debt capacity: a market equilibrium approach. Do managerial objectives drive bad acquisitions?