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Implied volatility information of Chinese SSE 50 ETF options

Author

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  • Wu, Lingke
  • Liu, Dehong
  • Yuan, Jianglei
  • Huang, Zhenhuan

Abstract

This paper examines the impact of the implied volatility information in SSE 50 ETF options on the underlying securities volatility. After segmenting options according to option type, moneyness, time to maturity and trading years, we confirm that options contain implied volatility information about the underlying securities, and there is a significant positive effect of the volatility risk premium on the volatility of underlying securities. As for the regression coefficient of volatility risk premium, the call option is higher than the put option due to the investors' risk aversion, and the long-term option is higher than the short-term option. With the moneyness from DOTM to DITM, the call options decrease while the put options increase for the existence of skew and kurtosis risk.

Suggested Citation

  • Wu, Lingke & Liu, Dehong & Yuan, Jianglei & Huang, Zhenhuan, 2022. "Implied volatility information of Chinese SSE 50 ETF options," International Review of Economics & Finance, Elsevier, vol. 82(C), pages 609-624.
    • Handle: RePEc:eee:reveco:v:82:y:2022:i:c:p:609-624
    DOI: 10.1016/j.iref.2022.07.009
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    Cited by:

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    2. Gong, Jue & Wang, Gang-Jin & Xie, Chi & Uddin, Gazi Salah, 2024. "How do market volatility and risk aversion sentiment inter-influence over time? Evidence from Chinese SSE 50 ETF options," International Review of Financial Analysis, Elsevier, vol. 95(PB).
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    4. Li, Zhe & Shen, Jiashuang & Xiao, Weilin, 2024. "Volatility risk premium, good volatility and bad volatility: Evidence from SSE 50 ETF options," The North American Journal of Economics and Finance, Elsevier, vol. 74(C).

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    More about this item

    Keywords

    Implied volatility information; Chinese SSE 50 ETF options; Volatility risk premium;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
    • G1 - Financial Economics - - General Financial Markets
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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