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Quality issues of implied volatilities of index and stock options in the OptionMetrics IvyDB database

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  • Martin Wallmeier

Abstract

For stock and index options in the United States, OptionMetrics records prices at 3:59 p.m., not 4:00 p.m. as assumed in previous literature. The resulting 1‐min time discrepancy with closing share prices creates artificial variability in implied volatility spreads and strongly affects market‐wide spreads. It leads to particularly large distortions at the onset of the COVID‐19 pandemic. For index options in Europe, OptionMetrics data show large deviations from put‐call parity even though the original option prices match the parity exactly. Finally, the implied volatilities of stock options in Europe show clusters of exceptional deviations due to incorrect dividend information.

Suggested Citation

  • Martin Wallmeier, 2024. "Quality issues of implied volatilities of index and stock options in the OptionMetrics IvyDB database," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 44(5), pages 854-875, May.
    • Handle: RePEc:wly:jfutmk:v:44:y:2024:i:5:p:854-875
    DOI: 10.1002/fut.22495
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    References listed on IDEAS

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