You are not logged in.

Implied volatility smiles, option mispricing and net buying pressure : evidence around the global financial crisis

Larkin, J., Brooksby, A., Lin, C. T. and Zurbruegg, R. 2012, Implied volatility smiles, option mispricing and net buying pressure : evidence around the global financial crisis, Accounting and Finance, vol. 52, no. 1, Special Issue : Global Financial Crisis, pp. 47-69, doi: 10.1111/j.1467-629X.2011.00419.x.

Attached Files
Name Description MIMEType Size Downloads

Title Implied volatility smiles, option mispricing and net buying pressure : evidence around the global financial crisis
Author(s) Larkin, J.
Brooksby, A.
Lin, C. T.
Zurbruegg, R.
Journal name Accounting and Finance
Volume number 52
Issue number 1
Season Special Issue : Global Financial Crisis
Start page 47
End page 69
Total pages 23
Publisher Wiley-Blackwell Publishing Asia
Place of publication Richmond, Vic.
Publication date 2012-03
ISSN 0810-5391
1467-629X
Keyword(s) Implied volatility smile
net buying pressure
option pricing
Summary Using the recent global financial crisis as an exogenous setting, we examine the presence and source of implied volatility smile phenomena in Australian S&P ASX 200 index options. We find a pronounced implied volatility smile for index puts in both bull and bear markets and a smile for index calls in the bear but not bull market. Implied volatilities of out-of-the money puts tend to be upwards biased whilst those of calls tend to be downwards biased. We also find that the bias in implied volatilities yields excess returns based on unhedged and delta-neutral trading strategies, suggesting that implied volatilities are related to option mispricing. Net buying pressure from market participants appears to be a source of mispricing in the case of out-of-the-money index puts with excess demand particularly pronounced during the bull period before the global financial crisis unfolded.
Language eng
DOI 10.1111/j.1467-629X.2011.00419.x
Field of Research 150201 Finance
Socio Economic Objective 900101 Finance Services
HERDC Research category C1 Refereed article in a scholarly journal
Copyright notice ©2012, Wiley-Blackwell Publishing Asia
Persistent URL http://hdl.handle.net/10536/DRO/DU:30046093

Document type: Journal Article
Collections: Faculty of Business and Law
School of Accounting, Economics and Finance
Connect to link resolver
 
Unless expressly stated otherwise, the copyright for items in DRO is owned by the author, with all rights reserved.

Versions
Version Filter Type
Citation counts: TR Web of Science Citation Count  Cited 0 times in TR Web of Science
Scopus Citation Count Cited 1 times in Scopus
Google Scholar Search Google Scholar
Access Statistics: 264 Abstract Views, 8 File Downloads  -  Detailed Statistics
Created: Mon, 09 Jul 2012, 13:39:17 EST by Aysun Alpyurek

Every reasonable effort has been made to ensure that permission has been obtained for items included in DRO. If you believe that your rights have been infringed by this repository, please contact drosupport@deakin.edu.au.