The impacts of public news announcements on intraday implied volatility dynamics

Abstract

We examine the responses of intraday option‐implied volatilities to scheduled announcements of macroeconomic indicators. The increase in implied volatility around macroeconomic news announcements is more pronounced for puts than for calls and is stronger for announcements made during trading hours than for those made during nontrading hours. These effects are also more pronounced in the crisis and postcrisis periods than in the precrisis period. Monetary policy announcements have a more substantial impact on volatility than other announcements have, even after controlling for news surprise components. The impact appears to be greater for policy rate hikes than for policy rate cuts.

Informed options trading around holidays

“…This finding confirms the traditional perspectives about experienced and informed foreign institutional traders (Ahn et al, 2008; Sim et al, 2016) and noisy domestic individual traders (Ryu, 2013b; Ryu et al, 2021; Yang, Lee, et al, 2018). The informational superiority of foreign traders is largely due to their ability to accurately process market‐wide information (Lee & Ryu, 2019b). Second, we observe holiday effects for domestic investors' call options trades both before and after holidays, whereas holiday effects for foreign investors' trades are only observed after holidays and not before.…”

Volatility Spillovers between Equity and Green Bond Markets

“…Volatility dynamics are an on-going hot research topic in the field of economics (Kim, Park, and Ryu, 2018 [24]; Ryu, 2015a, 2015b [25,26]; Chun, Cho, and Ryu, 2019, 2020 [27,28]; Ryu, 2014a, 2014b [29,30]). For example, some previous studies analyze the relationship between volatility movements and economic factors in financial markets (Shim, Kim, Kim, and Ryu, 2015 [31]; Lee and Ryu, 2018 [32]; Lee and Ryu, 2019 [33]). Other studies examine the return and volatility transmissions between related markets (Guo, Han, Liu, and Ryu, 2013 [34]; Kim, Ryu, Seo, 2015 [35]; Lee, Kang, and Ryu, 2015 [36]; Lee and Ryu, 2016 [37]; Lee, Lee, and Ryu, 2019 [38]).…”

The difference in the intraday return-volume relationships of spot and futures: a quantile regression approach

“…Thus, if the trading volume affects the distribution of returns, it should consistently and significantly affect the option-implied volatility as well. Further, because investors in the options market can choose from various options with different strike prices suitable for their trading objectives and intentions, the implied volatilities of options at different moneyness levels also reflect different intentions Chun et al, 2019;Lee and Ryu, 2019). Thus, examining the relationships between trading volumes and various implied volatilities (i.e., the implied volatilities constructed from options with different strike prices and maturities) can aid in understanding the impact of trading volumes on the distribution of returns.…”