Exploring the role of the realized return distribution in the formation of the implied volatility smile

Chalamandaris, George; Rompolis, Leonidas S.

doi:10.1016/j.jbankfin.2011.10.016

Cited by 7 publications

(4 citation statements)

References 63 publications

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“…Several studies, however, found the violation of the EMH (see e.g. Ali et al , 2010; Chalamandaris and Rompolis, 2012; Nikmanesh et al , 2014; Westerlund and Narayan, 2014; Golosnoy et al , 2015), while some studies are in support of the EMH (Westerlund and Narayan, 2014). Responding to the literature, this study hence adopts the EMH in explaining the effect of GST announcement on stock market volatility.…”

Section: Related Literature and Theoretical Backgroundmentioning

confidence: 99%

The effect of GST announcement on stock market volatility: evidence from intraday data

Haron

Salami

2019

JAMR

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Section: Related Literature and Theoretical Backgroundmentioning

confidence: 99%

The effect of GST announcement on stock market volatility: evidence from intraday data

Haron

Salami

2019

JAMR

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“…In essence, this model can generate time-varying equity and variance risk premia as it allows the conditional risk-neutral cumulants k Q j and, consequently, their physical counterparts to vary over time. 4 Chalamandaris and Rompolis (2012) reported that the average values of k Q 3 and k Q 4 are equal to −0.0004 and 0.00009, respectively, while the average value of k Q 2 is equal to 0.0036. These values correspond to time-series estimates of higher-order risk-neutral cumulants of the S&P 500 index from 1996 to 2007 estimated using option prices with 1-month time-to-maturity.…”

Section: S Tmentioning

confidence: 99%

“…Chalamandaris and Rompolis () reported that the average values of

k_{3}^{Q}

and

k_{4}^{Q}

are equal to

- 0.0004

and 0.00009, respectively, while the average value of

k_{2}^{Q}

is equal to 0.0036. These values correspond to time‐series estimates of higher‐order risk‐neutral cumulants of the S&P 500 index from 1996 to 2007 estimated using option prices with 1‐month time‐to‐maturity.…”

mentioning

confidence: 99%

Risk‐Free Rates and Variance Futures Prices

Rompolis

2015

Journal of Futures Markets

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This paper investigates the relation between risk‐free rates and ex‐ante market volatility. It derives a theoretical model implying a negative linear relation between risk‐free rates and variance futures prices. The latter are employed as a direct market‐based ex‐ante estimate of risk‐neutral volatility. Empirical analysis, conducted using LIBOR and variance futures prices written on the S&P 500 index, indicates that the predictions of the model are supported by the data. The paper also provides evidence that, first, this negative relation varies smoothly over time following business cycles, and, second, the variance risk premium is a significant component of this documented relation. © 2015 Wiley Periodicals, Inc. Jrl Fut Mark 36:943–967, 2016

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“…The implied volatility from stock options can explain the realized volatility better than can the historical volatility (Szakmary et al 2003). Brous et al (2010), see also Chalamandris and Rompolis (2012), Carr and Wu (2016).…”

Section: Estimation Of Ex-ante Physical Densities From Option Pricesmentioning

confidence: 99%

Matching distributions: Recovery of implied physical densities from option prices

Talponen¹

2018

Preprint

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We introduce a non-parametric method to recover physical probability distributions of asset returns based on their European option prices and some other sparse parametric information. Thus the main problem is similar to the one considered foir instance in the Recovery Theorem by Ross (2015), except that here we consider a non-dynamical setting. The recovery of the distribution is complete, instead of estimating merely a finite number of its parameters, such as implied volatility, skew or kurtosis. The technique is based on a reverse application of recently introduced Distribution Matching by the author and is related to the ideas in Distribution Pricing by Dybvig (1988) as well as comonotonicity.

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Exploring the role of the realized return distribution in the formation of the implied volatility smile

Cited by 7 publications

References 63 publications

The effect of GST announcement on stock market volatility: evidence from intraday data

The effect of GST announcement on stock market volatility: evidence from intraday data

Risk‐Free Rates and Variance Futures Prices

Matching distributions: Recovery of implied physical densities from option prices

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