Price discovery in the volatility index option market: A univariate GARCH approach

Venter, Pierre; Maré, Eben

doi:10.1016/j.frl.2021.102069

Cited by 7 publications

(2 citation statements)

References 20 publications

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“…Te descriptive statistics for all the selected price returns are reported in Table 1, which exhibit serial correlation, non-normality of distribution, and stationarity of all series. Te volatility series are calculated by the GARCH (1, 1) model since the GARCH (1, 1) model is widely used in estimating the volatility of variables [44,45].…”

Section: Sample Datamentioning

confidence: 99%

Time-Frequency Volatility Spillovers among Major International Financial Markets: Perspective from Global Extreme Events

Xiao

Dong

Huang

et al. 2023

Discrete Dynamics in Nature and Society

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In the context of the gradual intensification of the Russia-Ukraine conflict and the continuous spread of the COVID-19 pandemic, this paper concentrates on the impact of global extreme events such as the COVID-19 pandemic and the Russia-Ukraine conflict on the risk spillovers among major international financial markets. First, to measure the impact of the extreme events the on the volatility spillovers among major international financial markets in the time-frequency domain, we combine the TVP-VAR-based connectedness method and BK frequency connectedness approach and focus on the total, directional, and net volatility spillovers. Second, the network visualization method is applied to outline the structural change in the risk contagion, paths, and roles among international financial markets during different periods of global extreme events. The empirical results indicate that the risk spillovers (total, directional, and net spillovers) among international financial markets and the roles played by each market in the process of risk contagion have changed significantly in different periods of global extreme events. Furthermore, volatility spillovers among international financial markets are driven mainly by the high-frequency component (short-term spillovers) during the full sample time. However, the effects of the extreme events also persist in the medium and long terms. Our findings may help understand the dynamics among international financial markets under extreme shocks and provide significant implications for portfolio managers, investors, and government agencies in times of extreme events.

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Section: Sample Datamentioning

confidence: 99%

Time-Frequency Volatility Spillovers among Major International Financial Markets: Perspective from Global Extreme Events

Xiao

Dong

Huang

et al. 2023

Discrete Dynamics in Nature and Society

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“…The core objective of derivatives is to reduce the risk of investments. For implementing various financial/economic policies, derivatives has given a new dimension towards the financial system (Venter & Maré, 2022). Derivatives contributed to tremendous progress in investments through contract trading and stock volume.…”

Section: Introductionmentioning

confidence: 99%

An Analysis of Volatility in the Derivative Spot Market

2024

European Economic Letters

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Purpose:The derivative market has given a new dimension to the investors as well as the stock market structure. In India, there are a lot of investors who are not able to take high risks, so the development of derivatives has encouraged investors to trade in the stock market safely which may also affect the stock market volatility. In the current study, we have evaluated the influence of derivatives on spot market volatility in the last twelve years (2009 to 2022).Design/Methodology/Approach: -For the analysis, time series data has been gathered for a period of twelve years from January 2009 to December 2022. Data has been collected from various indices such as the Nifty Junior Index, Nifty Index, Index futures, and S&P 500 Index. By taking the first log difference the closing price values have been converted into daily compound returns. Augmented Dicky Fuller test has been applied to convert time series data into stationary series. The Lagrange Multiplier test is performed to determine whether the data could be utilized in a GARCH (Generalized Autoregressive Conditional Heteroscedasticity) iterative procedure. The GARCH (1,1) model has been employed for the analysis.Findings: Results of the GARCH (1,1) model indicate that whole spot market volatility has been reduced after introducing the derivatives. According to the findings, Nifty Junior Returns have an inverse relationship with Nifty returns. Similar results can be seen for S&P 500 returns and Nifty Junior which have an inverse relationship. The volatility has been reduced after introducing options and futures in the market. But it is also found that following the GARCH model utilized, options have a greater impact on Nifty returns because their coefficients are greater than the futures.Research Implications/ Future Scope: -The findings of this study are important for stock exchange executives, retail and institutional investors, as well as regulators. The results suggest that futures and options trading assist in their prescribed role of improving the quality of information and pricing efficiency to the spot market. This will empower the investors to prudently structure their strategies in both options and futures markets. This study can be extended to commodity and currency derivatives too. Originality of the Research:-This research is an original study towards investigating the impact of derivative trading on spot market volatility in an emergent market such as India.

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Application of Econometric Models for Sustainable Innovative Development of System-Forming Corporations of the Country and the Region

Кузнецова

Patlasov

2021

Lecture Notes in Networks and Systems

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Price discovery in the volatility index option market: A univariate GARCH approach

Cited by 7 publications

References 20 publications

Time-Frequency Volatility Spillovers among Major International Financial Markets: Perspective from Global Extreme Events

Time-Frequency Volatility Spillovers among Major International Financial Markets: Perspective from Global Extreme Events

An Analysis of Volatility in the Derivative Spot Market

Application of Econometric Models for Sustainable Innovative Development of System-Forming Corporations of the Country and the Region

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