Do Implied Volatilities Provide Early Warning of Market Stress?

Malz, Allan M.

doi:10.2139/ssrn.211448

Cited by 24 publications

(26 citation statements)

References 10 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…7 Some filters were included before the calculation of the implied volatilities. Traded calls with time to maturity inferior to 6 business days were eliminated in order to avoid distortions in volatility, as indicated by Malz (2000). Another reason is documented in Matos et al (2004), where they show that Brazilian typical real-dollar options behave like Asian options, 8 as maturity gets closer.…”

Section: Data Descriptionmentioning

confidence: 99%

“…We determined maximum length of 10 business days and the optimal lag length is chosen by AIC (Akaike Information Criteria) using univariate VAR (Vector Auto Regressive) model. We obtained a lag equal to 8 business days for every regression, which is close to the lag of 5 arbitrarily chosen by Malz (2000), assuming that price adjustments occur within one trading week.…”

Section: Table 2 -Informational Content Analysismentioning

confidence: 99%

“…The use of squared returns, as proposed by Malz (2000), is intended to capture large magnitude returns, focusing on kurtosis rather than skewness of the return distribution:…”

Section: Table 2 -Informational Content Analysismentioning

confidence: 99%

“…As in Andrade and Tabak (2001), it is verified if the information about subsequent realized volatility contained in implied volatility outperforms the information provided by past returns. Finally, as cited earlier, it is proposed a practical warning system to capture the informational content of implied volatilities in real-dollar options, as in Malz (2000).…”

Section: Introductionmentioning

confidence: 99%

“…Besides, Malz (2000) suggests that the information contained in option prices may properly work as a signal for stress events once these instruments provide market participants with the possibility of hedging their positions against huge price changes.…”

Section: Introductionmentioning

confidence: 99%

See 4 more Smart Citations

Investigating unusual changes in real-dollar exchange rate

Gomes¹,

Takami²,

Brandi³

2008

Rev. Bras. Econ.

View full text Add to dashboard Cite

A previsibilidade das distribuições de preços de ativos financeiros consiste em tema relevante tanto na literatura de risco como de apreçamento de ativos. Interesse especial reside na investigação acerca das probabilidades dos eventos de cauda, cujas realizações apresentam impacto de maior severidade comparativamente ao previsto pela distribuição Normal. Este trabalho tem como objetivo verificar se as volatilidades implícitas de opções de dólar detêm conteúdo informacional e poder preditivo em relação a retornos de grande magnitude. Nossos resultados sugerem que essas expectativas de mercado, de fato, carregam informação relevante sobre retornos futuros, além de conter poder preditivo significativo. Price distributions forecast has become a relevant subject for risk and pricing literature. Special concern resides on tail probabilities, which usually present more severe observations than Normal distributions would predict. This work aims to verify if the volatility implied in real-dollar options contains useful information about unexpected large-magnitude returns. Implied volatility is

show abstract

Section: Data Descriptionmentioning

confidence: 99%

Section: Table 2 -Informational Content Analysismentioning

confidence: 99%

“…The use of squared returns, as proposed by Malz (2000), is intended to capture large magnitude returns, focusing on kurtosis rather than skewness of the return distribution:…”

Section: Table 2 -Informational Content Analysismentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations