The behavior of option’s implied volatility index: a case of India VIX
The aim of this paper is to investigate the behavior of implied volatility in the form of day-of-the-week, year-of-the-month and surround the expiration of options. The persistence of volatility is modeled in ARCH/GARCH type framework. The empirical results have shown significant effects of the day-...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Vilnius Gediminas Technical University
2015-06-01
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| Series: | Business: Theory and Practice |
| Subjects: | |
| Online Access: | https://journals.vgtu.lt/index.php/BTP/article/view/8279 |
| _version_ | 1827363170435465216 |
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| author | Imlak Shaikh Puja Padhi |
| author_facet | Imlak Shaikh Puja Padhi |
| author_sort | Imlak Shaikh |
| collection | DOAJ |
| description | The aim of this paper is to investigate the behavior of implied volatility in the form of day-of-the-week, year-of-the-month and surround the expiration of options. The persistence of volatility is modeled in ARCH/GARCH type framework. The empirical results have shown significant effects of the day-of-the-week, month-of-the-year and day of options expiration. The positive significant Monday effect explains that India VIX rises significantly on the initial days of the market opening, and the significant negative Wednesday effect shows that expected stock market volatility fall through Wednesday-Friday. Moreover, the study reveals the fact on options expiration, the evidence shows that India VIX fall significantly on the day of expiration of European call and put options. The March and December months have reported significant negative impact on the volatility index. Certainly, this kind of results holds practical implication for volatility traders, and helps to the market participant in hedging and pricing of options. |
| first_indexed | 2024-03-08T07:43:06Z |
| format | Article |
| id | doaj.art-9a859269a0794003818fd83a7548f936 |
| institution | Directory Open Access Journal |
| issn | 1648-0627 1822-4202 |
| language | English |
| last_indexed | 2024-03-08T07:43:06Z |
| publishDate | 2015-06-01 |
| publisher | Vilnius Gediminas Technical University |
| record_format | Article |
| series | Business: Theory and Practice |
| spelling | doaj.art-9a859269a0794003818fd83a7548f9362024-02-02T16:46:53ZengVilnius Gediminas Technical UniversityBusiness: Theory and Practice1648-06271822-42022015-06-0116210.3846/btp.2015.463The behavior of option’s implied volatility index: a case of India VIXImlak Shaikh0Puja Padhi1Department of Management, Birla Institute of Technology & Science, BITS Pilani, Pilani, 333031 Rajasthan, IndiaDepartment of Humanities and Social Sciences, Indian Institute of Technology Bombay, 400076 Mumbai, IndiaThe aim of this paper is to investigate the behavior of implied volatility in the form of day-of-the-week, year-of-the-month and surround the expiration of options. The persistence of volatility is modeled in ARCH/GARCH type framework. The empirical results have shown significant effects of the day-of-the-week, month-of-the-year and day of options expiration. The positive significant Monday effect explains that India VIX rises significantly on the initial days of the market opening, and the significant negative Wednesday effect shows that expected stock market volatility fall through Wednesday-Friday. Moreover, the study reveals the fact on options expiration, the evidence shows that India VIX fall significantly on the day of expiration of European call and put options. The March and December months have reported significant negative impact on the volatility index. Certainly, this kind of results holds practical implication for volatility traders, and helps to the market participant in hedging and pricing of options.https://journals.vgtu.lt/index.php/BTP/article/view/8279implied volatilityIndia VIXIVIXday-of-the-weekoptions expirationmonth-of-the-year |
| spellingShingle | Imlak Shaikh Puja Padhi The behavior of option’s implied volatility index: a case of India VIX Business: Theory and Practice implied volatility India VIX IVIX day-of-the-week options expiration month-of-the-year |
| title | The behavior of option’s implied volatility index: a case of India VIX |
| title_full | The behavior of option’s implied volatility index: a case of India VIX |
| title_fullStr | The behavior of option’s implied volatility index: a case of India VIX |
| title_full_unstemmed | The behavior of option’s implied volatility index: a case of India VIX |
| title_short | The behavior of option’s implied volatility index: a case of India VIX |
| title_sort | behavior of option s implied volatility index a case of india vix |
| topic | implied volatility India VIX IVIX day-of-the-week options expiration month-of-the-year |
| url | https://journals.vgtu.lt/index.php/BTP/article/view/8279 |
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