An investigation of implied volatility during financial crisis: Evidence from Australian index options
Volatility implied by an option pricing model is seen as the market participants’ assessment of volatility. Past studies documented that implied volatility based on an option pricing model is found to outperform the historical volatility in forecasting future realised volatility. Thus, this study...
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| Main Authors: | , |
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| Format: | Conference or Workshop Item |
| Language: | English |
| Published: |
AIP Publishing
2014
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| Subjects: | |
| Online Access: | http://irep.iium.edu.my/51067/6/51067-new.pdf http://irep.iium.edu.my/51067/ http://scitation.aip.org/content/aip/proceeding/aipcp/10.1063/1.4898509 |
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| Summary: | Volatility implied by an option pricing model is seen as the market participants’ assessment of volatility. Past
studies documented that implied volatility based on an option pricing model is found to outperform the historical
volatility in forecasting future realised volatility. Thus, this study examines the implied volatility smiles and term
structures in the Australian S&P/ASX 200 index options from the year 2001 to 2010, which covers the global financial
crisis in the mid-2007 until the end of 2008. The results show that the implied volatility rises significantly during the crisis period, which is three time the rate before crisis. |
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