Market neutral volatility: a different approach to the S&P 500 options market efficiency
Autor(a) principal: | |
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Data de Publicação: | 2009 |
Tipo de documento: | Dissertação |
Idioma: | eng |
Título da fonte: | Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
Texto Completo: | http://hdl.handle.net/10071/2523 |
Resumo: | Under the efficient market hypothesis, an options price’s implied volatility should be the best possible forecast of the future realized volatility of the underlying asset. In spite of this theoretical proposition, a vast number of studies in the financial literature found that implied volatility is a biased estimator of the future realized volatility. These findings suggest that we are either in the presence of an inefficient market or that econometric models fail on that purpose. In this thesis, by introducing the concept of Market Neutral Volatility and the derivation of a theoretical model, we show what in fact the implied volatility forecasts and we prove that the S&P 500 options market is efficient. This property of the S&P 500 options market assures that the implied volatility cannot be a biased forecast of its future realized volatility. Thus, we conclude that the bias of the implied volatility estimator is due to the inadequacy of the commonly used econometric approaches. |
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Market neutral volatility: a different approach to the S&P 500 options market efficiencyMarket Neutral VolatilityVIXMarket EfficiencyImplied VolatilityUnder the efficient market hypothesis, an options price’s implied volatility should be the best possible forecast of the future realized volatility of the underlying asset. In spite of this theoretical proposition, a vast number of studies in the financial literature found that implied volatility is a biased estimator of the future realized volatility. These findings suggest that we are either in the presence of an inefficient market or that econometric models fail on that purpose. In this thesis, by introducing the concept of Market Neutral Volatility and the derivation of a theoretical model, we show what in fact the implied volatility forecasts and we prove that the S&P 500 options market is efficient. This property of the S&P 500 options market assures that the implied volatility cannot be a biased forecast of its future realized volatility. Thus, we conclude that the bias of the implied volatility estimator is due to the inadequacy of the commonly used econometric approaches.Sob a hipótese de eficiência dos mercados, a volatilidade implícita de uma opção deve ser a melhor previsão possível da futura volatilidade realizada do activo subjacente. Apesar deste argumento teórico, um vasto número de estudos realizados na literatura financeira, concluem que a volatilidade implícita é um estimador enviesado da volatilidade realizada futura. Estes resultados sugerem que, ou estamos na presença de um mercado ineficiente, ou que a metodologia econométrica utilizada é inadequada. Através da introdução do conceito de Market Neutral Volatility e da derivação de um modelo teórico, é demonstrado, o que na realidade a volatilidade implícita estima, e provamos que o mercado de opções sobre o S&P 500 é eficiente. A eficiência do mercado de opções sobre o S&P 500, garante que a volatilidade implícita desse mercado não pode ser um estimador enviesado da volatilidade realizada futura. Estes resultados permitem concluir que o problema da obtenção de estimativas enviesadas, deverá resultar do uso de metodologias econométricas inadequadas.2011-03-23T10:20:45Z2011-03-23T00:00:00Z2011-03-232009info:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/masterThesisapplication/pdfapplication/octet-streamhttp://hdl.handle.net/10071/2523engRuas, João Pedro Bentoinfo:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-11-09T17:43:58Zoai:repositorio.iscte-iul.pt:10071/2523Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T22:20:48.652875Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse |
dc.title.none.fl_str_mv |
Market neutral volatility: a different approach to the S&P 500 options market efficiency |
title |
Market neutral volatility: a different approach to the S&P 500 options market efficiency |
spellingShingle |
Market neutral volatility: a different approach to the S&P 500 options market efficiency Ruas, João Pedro Bento Market Neutral Volatility VIX Market Efficiency Implied Volatility |
title_short |
Market neutral volatility: a different approach to the S&P 500 options market efficiency |
title_full |
Market neutral volatility: a different approach to the S&P 500 options market efficiency |
title_fullStr |
Market neutral volatility: a different approach to the S&P 500 options market efficiency |
title_full_unstemmed |
Market neutral volatility: a different approach to the S&P 500 options market efficiency |
title_sort |
Market neutral volatility: a different approach to the S&P 500 options market efficiency |
author |
Ruas, João Pedro Bento |
author_facet |
Ruas, João Pedro Bento |
author_role |
author |
dc.contributor.author.fl_str_mv |
Ruas, João Pedro Bento |
dc.subject.por.fl_str_mv |
Market Neutral Volatility VIX Market Efficiency Implied Volatility |
topic |
Market Neutral Volatility VIX Market Efficiency Implied Volatility |
description |
Under the efficient market hypothesis, an options price’s implied volatility should be the best possible forecast of the future realized volatility of the underlying asset. In spite of this theoretical proposition, a vast number of studies in the financial literature found that implied volatility is a biased estimator of the future realized volatility. These findings suggest that we are either in the presence of an inefficient market or that econometric models fail on that purpose. In this thesis, by introducing the concept of Market Neutral Volatility and the derivation of a theoretical model, we show what in fact the implied volatility forecasts and we prove that the S&P 500 options market is efficient. This property of the S&P 500 options market assures that the implied volatility cannot be a biased forecast of its future realized volatility. Thus, we conclude that the bias of the implied volatility estimator is due to the inadequacy of the commonly used econometric approaches. |
publishDate |
2009 |
dc.date.none.fl_str_mv |
2009 2011-03-23T10:20:45Z 2011-03-23T00:00:00Z 2011-03-23 |
dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/masterThesis |
format |
masterThesis |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
http://hdl.handle.net/10071/2523 |
url |
http://hdl.handle.net/10071/2523 |
dc.language.iso.fl_str_mv |
eng |
language |
eng |
dc.rights.driver.fl_str_mv |
info:eu-repo/semantics/openAccess |
eu_rights_str_mv |
openAccess |
dc.format.none.fl_str_mv |
application/pdf application/octet-stream |
dc.source.none.fl_str_mv |
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Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
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RCAAP |
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RCAAP |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
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