Browsing by Subject "Implied volatility"

Now showing 1 - 3 of 3

Open Access
Implied volatility indices: a review and extension in the Turkish case
(Elsevier, 2018-08-13) Şensoy, Ahmet; Omole, J.
We re-visit the model-free methodology of the new VIX, and review how its counterparts are estimated empirically across the world. Then, we modify its parameter selection procedure for it to be compatible with the microstructure characteristics of emerging derivatives markets. Applying this approach on Turkish market data, we introduce VBI; the implied volatility index of Borsa Istanbul. Accordingly, (i) VBI is a strong predictor of the future realized volatility, (ii) it is significantly correlated with Turkey's own financial indicators, but not with many global financial indicators, (iii) there is an implied volatility spillover from US equity market to Borsa Istanbul, but not the other way around.
Open Access
Option-based variables and future stock returns in normal times and recessions
(Elsevier, 2024-10) Açıkalın, Özgür Şafak; Önder, Zeynep
We examine the prediction of future returns of optionable stocks trading in the US exchanges by several option-based variables for the period between 1996 and 2015. It is found that option-based variables are significant factors in estimating future stock returns in normal periods and during recessions. The spread between weighted averages of implied volatilities calculated with all call and put options of underlying stocks is found to have the highest effect on future stock returns. Although the mean squared errors of the option models are significantly higher during recessions than the expansion periods, the model with option-based variables outperforms the market model and the Fama-French Three Factor Model in both recessions and the whole sample period. The findings suggest that option-based models incorporate information about extreme events more than the traditional models.
Open Access
What do the option-based variables tell us about future returns?
(2023-08) Açıkalın, Özgür Şafak
Option-based variables reflect investors’ assessment of future risk and therefore contain information about expected stock returns. Early studies show that information flows from the options market to the equity market. Empirical evidence suggest that portfolios created using option-based variables have returns that cannot be fully explained by traditional asset pricing variables. Following Bali, Chabi-Yo and Murray (2022), this thesis examines the predictive power of option-based variables, such as the difference between call and put implied volatilities, the difference between realized volatility of the underlying stock and option implied volatility, and the change of the open interest in options. The options on stocks traded in the US stock exchanges in the period between 1996 and 2015 are analyzed. The study also investigates whether the predictive power of the option-based variables changes during periods of economic recession. The findings show that option-based variables increase the predictive power of the models when used with the traditional asset pricing variables. Option-based variables are found to be useful predictors of stock returns during recessions as well. The estimation model which includes option-based variables and stock characteristics outperforms CAPM and Fama-French three-factor model during both recession and expansion periods but the accuracy of the model is significantly lower during recessions. The model fails to estimate the future returns of high beta stocks as accurately as low beta stocks. Portfolios formed based on quintile values of the option-based variables create economically large but statistically insignificant abnormal returns.