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| Author | : Soku Byoun |
| Publisher | : |
| Total Pages | : |
| Release | : 1999 |
| Genre | : Derivative securities |
| ISBN | : |
| Author | : Soku Byoun |
| Publisher | : |
| Total Pages | : |
| Release | : 2010 |
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Using a stochastic volatility option pricing model, we show that the implied volatilities of at-the-money options are not necessarily unbiased and that the fixed interval time-series can produce misleading results. Our results do not support the expectations hypothesis: long-term volatilities rise relative to short-term volatilities, but the increases are not matched as predicted by the expectations hypothesis. In addition, an increase in the current long-term volatility relative to the current short-term volatility is followed by a subsequent decline. The results are similar for both foreign currency and the Samp;P 500 stock index options.
| Author | : Scott Mixon |
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| Total Pages | : |
| Release | : 2000 |
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This paper tests the expectations hypothesis of the term structure of implied volatility for several national stock market indices (Samp;P 500, FTSE 100, DAX, CAC, and Nikkei 225). The tests indicate that the slope of at-the-money implied volatility over different maturities has predictive ability for future short dated implied volatility, although not to the extent predicted by the expectations hypothesis. Equivalently, the forward implied volatility is a biased forecast of future implied volatility. The low forecast power may be due to a failure to control for a risk premium in the prices of options. Evidence is presented that a time varying risk premium that increases in volatility is consistent with the results. Including a volatility risk proxy in the specification improves the forecasting ability beyond that embedded in the implied volatility term structure.
| Author | : Alok Dixit |
| Publisher | : |
| Total Pages | : |
| Release | : 2008 |
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This research paper is aimed at diagnosing the pricing inefficiencies prevailing in the Indian index options market. The inefficiencies are being revealed by testing the rational expectations hypothesis on the term structure of implied volatilities of index options. In the paper, an effort has been made to diagnose: (a) whether the implied volatilities, in the case of both short dated as well as long dated options, are mean-reverting or not; and (b) whether the volatilities implied by the long dated options are consistent with the future volatilities estimated on the basis of corresponding volatilities implied by short dated options, assuming rational expectations to hold. The implied volatilities are calculated by inverting the adjusted form of Black-Scholes model. For the analysis, daily data on index options based on National Stock Exchange index i.e. Samp;P CNX NIFTY has been used for the period from June 4, 2001 (starting date for index options in Indian securities market) to December 31, 2006. The analysis reveals that implied volatilities are, in fact, mean-reverting. However, implied volatility of long dated options is not evolving the way as warranted by rational expectations hypothesis, and the evidences of overreaction and underreaction are seen for both calls as well as put options.
| Author | : Ruthann Kimberly Melbourne |
| Publisher | : |
| Total Pages | : 178 |
| Release | : 2000 |
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| Author | : Geert Bekaert |
| Publisher | : |
| Total Pages | : 58 |
| Release | : 1996 |
| Genre | : Interest rates |
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| Author | : Jim Campasano |
| Publisher | : |
| Total Pages | : 41 |
| Release | : 2018 |
| Genre | : |
| ISBN | : |
I examine the predictability of equity implied volatility from the term structure, and find that forward volatility levels are biased predictors of future spot implied volatility. I construct options structures which proxy for forward volatility assets, and show that a long-short portfolio of forward volatility assets produce significantly profitable returns. As the construction of the trade is borne from a violation of an expectations hypothesis, the strategy is similar to the carry trade effected in foreign exchange and other assets. Unlike the returns to carry in foreign exchange and other assets, the forward volatility assets are not exposed to liquidity or volatility risks and negatively loads on market risk.
| Author | : Jack D. Schwager |
| Publisher | : John Wiley & Sons |
| Total Pages | : 723 |
| Release | : 2017-01-03 |
| Genre | : Business & Economics |
| ISBN | : 1118859596 |
The essential futures market reference guide A Complete Guide to the Futures Market is the comprehensive resource for futures traders and analysts. Spanning everything from technical analysis, trading systems, and fundamental analysis to options, spreads, and practical trading principles, A Complete Guide is required reading for any trader or investor who wants to successfully navigate the futures market. Clear, concise, and to the point, this fully revised and updated second edition provides a solid foundation in futures market basics, details key analysis and forecasting techniques, explores advanced trading concepts, and illustrates the practical application of these ideas with hundreds of market examples. A Complete Guide to the Futures Market: Details different trading and analytical approaches, including chart analysis, technical indicators and trading systems, regression analysis, and fundamental market models. Separates misleading market myths from reality. Gives step-by-step instruction for developing and testing original trading ideas and systems. Illustrates a wide range of option strategies, and explains the trading implications of each. Details a wealth of practical trading guidelines and market insights from a recognized trading authority. Trading futures without a firm grasp of this market’s realities and nuances is a recipe for losing money. A Complete Guide to the Futures Market offers serious traders and investors the tools to keep themselves on the right side of the ledger.
| Author | : Michael R. Sefchick |
| Publisher | : |
| Total Pages | : 152 |
| Release | : 1983 |
| Genre | : Interest rates |
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| Author | : Johura Begum |
| Publisher | : |
| Total Pages | : |
| Release | : 2020 |
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The Yield curve is very prominent in the economics and finance literature to analyze the behavior of households and investors towards bonds markets. In this paper we explore and test the Expectations Hypothesis (EH) of the term structure for a number of international bond markets. We use data at the short and long end maturities for the Treasury bill rate and the Government of Canada bond rate. The sample includes monthly yields for maturities ranging from 1, 3, 5-month treasury bills and 1, 5, 10 and more years for Government of Canada bonds, USA bonds, UK bonds and France bonds. We use the Engle-Granger cointegration test and OLS to estimate the spread between short and long term interest rates, including tests for serial correlation in residuals, and to test the validity of the EH. The EH is rejected in all cases.
