29639
20150113231514.0
oai:doc.rero.ch:20120820090958-OT
report
cdu33
unifr
infonet_economy
dissertation
cdu1
preprint
cdu16
postprint
journal
book
thesis
rero_explore
thesis_urn
cdu34
R007164258
eng
33
Wallmeier, Martin
eng
Smile in Motion : An Intraday Analysis of Asymmetric Implied Volatility
2012-08-20
34
Working Papers SES
427
eng
We present a new method to measure the intraday relationship between movements of implied volatility smiles and stock returns. It is based on an enhanced smile regression model which captures patterns in the intraday data which have not yet been reported in the literature. Using transaction data for exchange-traded EuroStoxx 50 options from 2000 to 2011 and DAX options from 1995 to 2011, we show that, on average, about 99% of the intraday variation of implied volatility can be explained by moneyness and changes in the index level. Compared to the typical smile regression with moneyness alone, about 50% of the remaining errors can be attributed to movements in the underlying index. We find that the intraday evolution of volatility smiles is generally not consistent with traders' rules of thumb such as the sticky strike or sticky delta rule. On average, the impact of index return on implied volatility is 1.3 to 1.5 times stronger than the sticky strike rule predicts. The main factor driving variations of this adjustment factor is the index return. Our results have implications for option valuation, hedging and the understanding of the leverage effect.
eng
volatility smile ; implied volatility ; leverage effect ; index options ; highfrequency data
http://www.unifr.ch/ses/wp
Faculté SES
WP_SES_427.pdf
application/pdf
525511
http://doc.rero.ch/record/29639/files/WP_SES_427.pdf
order:1
Document
Faculté des sciences économiques et sociales
Décanat, Av. de l'Europe 20, 1700 Fribourg
Université de Fribourg
Fribourg
doc.support@rero.ch
REPORT
UNIFR
Working Papers SES
20120820090958-OT