Relationship between Implied Volatility Index and its Underlying Market Index

Transcription

1 Relaionship beween Implied Volailiy Index and is Undelying Make Index Compaison beween Chinese and Ameican Make Zheng Chengli HuaZhong Nomal Univesiy School of Economics and Business Adminisaion Wuhan China Yao Yinhong HuaZhong Nomal Univesiy School of Economics and Business Adminisaion Wuhan China Absac: We analysis he elaionship beween implied volailiy and is undelying make index, fom 5..9 o 6.. in Chinese make and fom 4.. o 6.. in Ameican make. Though he egession beween implied volailiy index and is undelying make index, and he egession wih he lag of hem, hen he pospecive analysis of implied volailiy index. We find ha in Ameican make, hee is a negaive and asymmeic elaionship beween implied volailiy index (VIX) change ae and he S&P 5 index (SPX) log euns ae, and he influence of coesponding peiod is moe significan and he lags also have is influence, hee is also a mean eveing effec, he VIX index is fowad-looking wihin a elaively sho peiod of ime. While in Chinese make, he elaionship beween Chinese implied volailiy index (ivix) and ShangHai 5 index (SSEX) is no significan, ivix change ae and he SSEX log eun ae has a significan invese elaion, each of hem has mean eveing effec, ivix index change ae does no eflec he fowad-looking in he eseach sample. Key wods: implied volailiy; egess analysis; negaive and asymmeic elaionship; mean eveing pocess; fowad-looking I. Inoducion VIX index, measuing he degee of sock pice flucuaions in he fuue, is an impoan index fo invesos o judge he cuen make, hus analyzing he elaionship beween he volailiy index and is undelying sock make index is vey impoan. Ealy in 973, when sock opion ading was began, he Chicago Boad Opions Exchange (CBOE) had he idea o consuc volailiy index. Gasineau (977) [] calculaed he aveage consucion volailiy index by he implied volailiy of in-he-money call opion on he 4 socks. Cox and Rubisein (985) [] impoved Gasineau s mehod of ceaing index volailiy and he new mehod conains moe opions of a same socks, weighing volailiy on he opion's expiaion ime. In 993, Whaley poposed he esablishmen of make volailiy index o measue he degee of sock pice flucuaions in he fuue. [3] In he same yea, he Chicago Boad Opions Exchange (CBOE) developed volailiy index based on he implied volailiy of

2 S&P index opions and calculaed he VIX index since 986 using he hisoical daa. In 3, CBOE and Goldman amelioaed volailiy index wih undelying S&P 5 index opions, which is depend on he in-he-money and ou-of-he-money opion of he S&P 5 index fo execuive pice and is based on he Model-Fee Implied Volailiy deduced by Bien-Jones and Neubege () [4]. The implied volailiy index eflecs he expeced volailiy ae of S&P 5 wihin monh in fuue, also known as "fea gauge". I eflecs he sock pice volailiy expecaion of invesos in he fuue. highe Index, highe inveso's demand fo opions, which means invesos feel moe uneasy on he sock make siuaion in he fuue; lowe index, lowe inveso's demand fo opions, eflecing a compae sable and smooh make, ha means volailiy index can be used as a measue ool of make isk. Figue shows he change beween he U.S. make S&P5 index and VIX (he hoizonal axis shows ime ineval , he lef veical axis shows he closing pice on SPX, he igh veical axis shows closing pice on VIX). Oveall i shows a elaionship of phase change beween VIX and SPX, fom Januay 4 o middle 7, he VIX usually beween -; in he second half of 7, VIX ising gadually; on Novembe 8, eaching he highes poin; he ohe seveal highs wee elaed o Euopean soveeign deb cisis, he soveeign deb cisis in he Unied Saes, he global unsable facos (he Chinese economy cooled, Geek elecions). 4 NOV 8 Financial Cisis SPX VIX May' AUG' 5 May' FIGURE VIX AND S&P 5 INDEX CLOSING PRICE CHANGE TREND Since volailiy's esablishmen in he Unied Saes in 993, Euex, he Taiwan Fuues Exchange, India's naional sock exchange, he Koea sock exchange, he Osaka Secuiies Exchange, he Hong Kong Sock Exchange have launched hei own implied volailiy index. Chinese implied volailiy index (ivix) was eleased by he Shanghai Sock Exchange o measue he expeced volailiy of Shanghai 5ETF fo he nex 3 days. Chinese ivix is esablished by calculaing Shanghai 5ETF opion pices on he basis of he vaiance swap pinciple. The Chinese ivix was fis eleased on June 6 5 and he saing dae was Febuay 9 5, when he Shanghai 5ETF opions was lised. The Chinese ivix index daily eleased end-of-day and inaday daa afe closing quoaion. In he Chinese make, he sample socks of SSE 5 index is fomed by 5 mos epesenaive socks on he Shanghai sock make. I can eflec he oveall siuaion of he mos make influence enepise on he Shanghai sock make. Shanghai 5ETF opions is a domesic finge ading opening index fund undelying he SSE 5 index. This pape analyses on he elaionship beween he ivix and he SSE 5 index, and compaes he China make o he Unied Saes make.

3 II. Lieaue Review Thee ae los of empiical analysis on he elaionship beween implied volailiy and is undelying make index. Whaley(993) [3] gave he implied volailiy index consucion, and poined ha he invese elaionship beween VIX and OEX wee no pefec. Fleming, Osdied and Whaley (995) [5] analyzed he daily and weekly VXO index(he implied volailiy on he S&P index opion) fom 986 o 993, hen fond ha he fis-ode auocoelaion of daily changes is significanly negaive, he negaive fis-ode auocoelaion of weekly changes is moe ponounced, and hee was a lage negaive conempoaneous coelaion and asymmey elaionship beween VIX changes and S&P index euns, hey hough VIX pefoms well as a volailiy foecas. Maggie and Thomas(999) [6] found ha VIX change ae is saisically significan leading indicaos of daily make euns. Whaley() [7] found ha high levels of VIX ae coinciden wih high degees of make umoil hough analyzing he las 4 yeas hisoy seious daa. Whaley() [7] found ha hee is a song negaive and asymmeic elaionship beween conempoaneous changes in implied volailiy indexes and he undelying sock indexes fo boh he S&P and he Nasdaq, and exemely high levels of implied volailiy signal aacive buy poins fo ades who wan o ake long posiions in he undelying index. Banejee Doan and Peeson(7) [9] found ha hee was a songe volailiy of VIX deivaives. Hibbe, Daigle and Dupoye(8) [] poved ha he song daily and inaday negaive eun-implied volailiy elaion, boh he pesence and magniude of he negaive elaion and he asymmey beween eun and implied volailiy iindex ae mos closely associaed wih exeme changes in he index euns. Becke Clemens and McClelland(9) [] found ha he VIX index boh subsumes infomaion elaing o pas jump conibuions o aal volailiy and eflecs incemenal infomaion peaining o fuue jump aciviy. Chow, Jiang and Li(4) [] hough ha VIX undesaes he ue volailiy wihou imposing any sucue on he undelying focing pocess. Those lieaues mainly confimed ha hee is a negaive and asymmeic elaionship beween implied volailiy change ae and is undelying make index eun ae, and he implied volailiy is fowad-looking. Los of he eseach ae on Ameican make, based on he above schola expeience, we inegae and opimize he eseach mehods o analysis he elaionship beween ivix and SSE 5 index. Fisly, we analysis he saisical chaaceisics of he ime seies. In addiion, invesigaing he conempoaneous elaionship beween ivix change ae and SSE 5 index logaihmic eun ae. Moeove, examining he eun-volailiy elaion wih hei lags. Finally, judging he VIX index is a fowad-looking indicao o no. In his pocession, compaed o he Ameican make, we analysis he effeciveness of ivix in Chinese make. III. Implied Volailiy Index Consucion VIX is an index, like he Dow Jones Indusial Aveage (DJIA), compued on a eal-ime basis houghou each ading day, he only meaningful diffeence is ha i measues volailiy no pice. [6] VIX based on index opions ahe han sock opions, and VIX is based on he implied volailiies of boh call and pu opions. [5] We need hee ypes of infomaion o compuing hese componen implied volailiies [5] : an opion valuaion model, he values of he model's deeminaes(expec fo volailiy) and an obseved opion pice. VIX s consucion is based on he Black-Scholes(973) [3] and Meon(973b) [4]. Accoding o he Whie pape of Chicago Boad Opions Exchange, he genealized fomula used in he VIX calculaion is:

4 K F = T i Ki T K whee VIX /, is he implied volailiy. Mcuen day Mselemen day Mohe day T : Time o expiaion( T ) Minues in a yea Mcuen day i RT e Q Ki () minues emaining unil midnigh of he cuen day M selemen day =minues fom midnigh unil 8:3 a.m. fo "sandad" SPX expiaion o minues fom midnigh unil 3: p.m. fo "weekly" SPX expiaion Mohe ime oal minues in he days beween cuen and expiaion day F : Fowad index level desied fom index opion pices ( F Sike Pice e RT Call Pice Pu Pice ) K o : Fis Sike below he fowad index level, F K i : Sike pice of he ih ou-of-he-money opion; a call if Ki K ; and a pu if Ki K ; boh pu and call if Ki K K i :Ineval beween sike pices-half he diffeence beween he sike on eihe side of K i : Ki Ki Ki R : Risk-fee inees ae o expiaion i Q K : The midpoin of he bid-ask spead fo each opion wih sike K i Fisly, selecing he opions o be used in he VIX calculaion, hen calculaing volailiy and fo boh nea-em and nex-em opions, finally, calculaing he 3-day weighed aveage of and, and aking he squae oo of ha value and muliply by o ge VIX. N N N N N VIX T T T 3 3 T 365 NT N T N T N T N 3 () N T numbe of minues o selemen of he nea-em opions N T numbe of minues o selemen of he nex-em opions N3 numbe of minues in a 3 days N365 numbe of minues in a 365-day yea IV Regession of Implied Volailiy Index and Is Undelying Make Index A. The basic daa analysis Ou empiical applicaion deals wih he SSE 5 index and is coesponding implied volailiy index (ivix), oally 5 ading days. and aking he S&P 5 index and is implied volailiy

5 index(vix) as a conacion, oally 355 ading days. We ge he ivix index seies fom Shanghai Sock Exchange, and he ohe daa fom Wind. Table pesens some bief chaaceisics of he sock indexes and implied volailiy indexes fo hese wo samples, we can see ha he sa and end value of ivix ae geae han VIX, and ivix is geae han VIX in geneal, he volailiy of VIX of Ameican make is geae han ha's in Chinese make. TABLE DESCRIPTIVE STATISTICS OF DATA SSE 5 index ivix index Sa End Sa End Min Mean Max S&P5 VIX 指数 Sa End Sa End Min Mean Max *** means is significan a 99% confidence level;** means is significan a 95% confidence level;* means is significan a 9% confidence level. Figue (he hoizonal axis epesens ime ineval beween 5--9 and 6.., he lef veical axis epesens he SSE 5 closing pice, he igh veical axis epesens he ivix closing pice) give he change end of ivix closing pice and SSE 5 index closing pice. We can see ha ivix eached he highes poin in June 9h a he fis ime, and he sock make in China occued in sevee shock. And he second ime was a he end of Augus, he eason is ha he RMB's devaluaion and he change of inenaional make of moneay policy. Fom hese wo pominen ineval, ivix eflecs inveso' fea on he Chinese make. bu in geneal, he coelaion coefficien beween ivix and SSE 5 index is posiive, hey change in he same diecion mos of he ime FIGURE IVIX AND SSE 5 INDEX CLOSING PRICE CHANGE TREND. SSEX ivix B. Conempoaneous changes in he sock and implied volailiy Accoding o Whaley(), Gio(5), he elaionship beween implied volailiy index and is undelying make index is negaive and asymmeic. We will sudy he ineacion beween implied volailiy and is undelying index fom boh posiive and negaive change. Since ivix and VIX have song fis-ode auocoelaion of, he auocoelaion coefficien eached.95 and.98 especively,

6 and hey all have a song ail, o avoid spuious egession, we deal wih he ime seies of ivix change ee and is undelying make index closing pice of logaihmic eun ae. The egession equaions of Chinese make ae as follows: ivix (3) SZX, SZX, ivix ivix SZX, (4) Whee, ivix VIX VIX, ln ln SZX, SZX SZX ;when ivix, ivix ivix,o ivix, he same o ivix SZX, SZX,, is he OLS eo em. We only lis he egession equaions of Chinese make, we can also ge he egession equaion of Ameican make in he same way, and he same below. TABLE THE REGRESSION COEFFICIENTS OF CONTEMPORANEOUS REGRESSION Chinese make DW AdjusedR.48(.78).9893(.86) 4.4(.76) DW AdjusedR.9(.99) -.8(-.945).(.3465) Ameican make DW AdjusedR -.694*(-.578) ***(-6.645) -34.7***(-.738).66.7 DW AdjusedR.4*(.) -.59***(-.564) -.56***(-.559) *** means is significan a 99% confidence level; ** means is significan a 95% confidence level; * means is significan a 9% confidence level. Table gives he egess esuls beween implied volailiy and is undelying make index of Chinese make and Ameican make, Whie s heeoscedasic consisen sandad eos ae epoed in all cases (he same below). In Ameican make, he egession equaion and he egession coefficiens ae all significan. The esimaed ineceps of hose wo egession equaions ae close o zeo, his means ha if he S&P5 index does no change ove he day, he change of VIX should be negligible. Similaly, if he VIX does no change ove he day, he change of S&P5 index should be negligible. So, VIX and S&P 5 index end o follow a mean-eveing pocess, which means he explained vaiable ends o he mean level. is unequal o, which indicaes hee is a negaive elaionship beween and VIX no mae go up o down, and he effec is SPX, SPX,

7 asymmeic, because is highe in absolue value han, which indicaes ha negaive euns fo he sock index ae associaed wih much geae elaive changes in he implied volailiy index han ae posiive euns. So, VIX index can eflec inveso feas of make downwad. is geae han, which indicaes ha changes much moe when VIX changes in posiive han negaive way, so SPX, invesos ae moe sensiive on he ising of VIX index. In Chinese make, he egession equaion and he egession coefficiens ae no significan a 9% level, so i is meaningless o analysis he equaion. Bu only fom he pespecive of faco analysis, he elaionship beween ivix and is asymmeic, he effec is geae fo SZX, ivix SZX, SZX, when negaive change ahe han posiive change, and he effec o is negaive when ivix ise, and he effec o is posiive when ivix go down. SZX, C. Lags change in he sock and implied volailiy Accoding o he egess equaion of Hibbe e. al(8), we neglec he inaday effec and invesigae he ineacion beween implied volailiy index change ae and is undelying make index closing pice logaihmic eun ae and hei lags. In Chinese make, he egess equaions ae as follows: ivix SZX, SZX, 3 SZX, 4SZX, 3 ivix ivix ivix SZX ivix ivi ivix VIX 3, X 3 4i 3 5 SZX, 6 SZX, 7 SZX, 3 (5) (6) The esuls of egess equaion in Chinese make and Ameican make ae as follows: Chinese make TABLE 3 THE REGRESSION COEFFICIENTS OF REGRESSION WITH LAGS A. R.39 (.3).858 (.35) -7.86* (-.7574) -6.3 (-.637) (.8665).35 (.36) -. (-.547) -. (-.6) A. R -.7 (-.45). (.3). (.388).9 (.845). (.79).96 (.347) (-.7).83 (.3794).367 Ameican make A. R.5 (.4835) -.66* ** ( ) * (-.756) -.7 (-.67).5896 (.568) -.75*** (-.974) -.44 (-.9349) -.547* (-.7369) *** -.5** *** A. R

8 (.697) (4.98) (-.48) (-.478) (-.69) (-.644) (-.5) (.574) *** means is significan a 99% confidence level; ** means is significan a 95% confidence level; * means is significan a 9% confidence level. In Ameican make, he equaion of SPX, VIX o and hei lags is significan. In his SPX, SPX, equaion, VIX VIX 3 is significan o VIX, which indicaes ha he implied volailiy index change ae is effeced by hei lags and is undelying make index SPX, logaihmic ae. Accoding hose significan facos, hee is a negaive elaionship beween SPX, and VI, and has a geae effec, which indicaes he ise of make index eun X SPX, can esul o he down of implied volailiy index change ae. The elaionship is also negaive beween VIX and VIX VI, which indicaes he ise of implied volailiy can esul o he down of iself, and i also eflecs he mean-eveing pocess of implied volailiy. And on he analysis he SP X, egession of o VIX and hei lags, he equaion is also significan, he effec fom VIX VIX o is significan, which indicaes ha he make index eun is SPX, X 3 SPX, effeced by implied volailiy and hei lags. In geneal, he conempoaneous elaionship beween VIX and SPX, is moe significan, and he lae is he fis-ode lag. And i indicaes ha he SPX, negaive elaionship beween VIX and, and hei mean-eveing pocess. In Chinese make, hese wo equaions ae no significan. Fom he pespecive of egess coefficiens, he effec fom o ivix is significanly negaive, which indicaes ha hee is SZX, a song negaive elaionship beween SZX, and ivix eun can esul o he decease of he implied volailiy nex ading day., he ise of he undelying make index V. Fowad-looking analysis of implied volailiy index Gio(5) [8] analyzed he fowad-looking of implied volailiy index by inoducing dummy vaiables, and he hough ha exemely high levels of implied volailiy signal aacive buy poins fo ades who wan o ake long posiions in he undelying index, and affimaive answeed o he quesion Ae implied volailiy index fowad-looking indicaos?. We add anohe caegoy be explained below), and apply o Chinese make, hen compaed hose esuls o Ameican make. The egess equaion ae as follows: R (i ll d D D L D (7) 5d D D L D (8) d D D L D (9)

9 6d D D D L () Whee, D, D,, D ae dummy vaiables defined such ha Di if R i, o Di. is he OLS eo em. We adjus slighly abou he algoihm based on Gio (5), and aking Ameican make fo example, he algoihm is as follows: () Taking he fome 5 ading days as he iniial sample space, denoed by T 5. A a given ime, he so sample is se VIX i T,, L, and ge he caegoies i R, R, L,R by he ascending ode se. () Judging he caegoies of VIX [ T, T ]. If VIX minvix, hen VIX is i anked as R, and ; if D maxvix VIX, hen VIX is anked as R, D ; In ohe i cases, VIX is anked as one of he R, R, L, R based on he value o iself, and he coesponding dummy vaiable is. Those disinc dummy vaiables can be used in a linea egession model. (3) Esimaing he paamees of equaion (7), whee d lnspx lnspx. (4) Esimaing he paamees of equaion (8.9.). and in sep (), we judge he caegoies of [, 5], VIX [ T, T ], VIX [ T, T 6] VIX T T, and in sep (3), PX, ln SPX, 5 lnspx lnspx 5d ln l SPX 5 n S d SPX ln d. whee, d, d 5, d, 6d ae he fowad-looking -, 5-, -, and 6- day elaive changes in he level of he S&P 5 index. The esimaing oucome is as follows in he Ameican make: 6 TABLE 4 OUTCOME OF FORWARD-LOOKING REGRESSION Coefficien(%) d 5d d 6d -.(-.9) -.3(-.5).(.3346) -.(-.3).3(.8876).4(.893).(.67).35(.489).4(.948).(.876).34(.846).99***(3.75) 3 -.7(-.4653) -.(-.8).35(.934).69***(.798) 4 (-.58).9(.9).69*(.778).8***(3.544) 5 -.4(-.4484) -.9(-.3837).7(.633).49***(3.89) 6.8(.867).(.4577).83*(.9595).***(.877) 7.3(.47).35*(.93).***(3.57).66***(3.8887) 8 -.(-.67).38(.688).89(.63) 3.6***(4.9) 9 -.(-.93).9(.3).*(.947) 3.8***(4.938).3***(3.88).76**(.639).77***(3.58) 4.4***(5.4473).(.488).3(.8).98***(3.9) 3.9**(.9994) -.4(-.36).(.487) -.34(-.498) -.54(-.63) 3 -.(-.35).36(.9).75(.7).7(.3438)

10 4 (-.8).6(.75).48(.79) -.7(-.95) 5 -.(-.649) -.3(-.473).84(.9884) -.(-.48) 6.9(.59).33(.79).7**(.).5(.644) 7 -.9(-.556) -.63(-.97) -.6(-.55).3(.47) 8 -.(-.58) -.(-.4853) -.9*(-.668).43(.567) 9.(.77) -.3(-.398) -.7(-.457) -.38(-.857) -.3(-.775) (.6).(.5) -.48(-.954).3*(.7863).*(.838) -.7(-.9) -.6(-.635) A. R *** means is significan a 99% confidence level; ** means is significan a 95% confidence level; * means is significan a 9% confidence level. Accoding o able4, he equaion ae no significan judging by adjused R,Newey-Wes sandad eos ae given in paenheses. We can find ha he coefficiens of caegoy ae significan, and he coefficiens of caegoy is significan when i foecas he fowad-looking - R and 5- day euns, which indicaes ha i a buy poins fo ades who wan o ake long posiions in he undelying index, when VIX is in he middle of fome 5 ading days' VIX o VIX is exemely high in a sho peiod like fuhe day o 5 days. Coesponding o he make, when VIX is locaed in he median level, he make's volailiy is smalle, invesos ae moe opimisic abou he make, suiable fo long posiion invesmen; when VIX is exemely high, he makes ae ovesold, which should benefi ades eneing long posiions. when i foecas he fowad-looking - and 6- day euns, he dummy vaiable' coefficiens ha coesponding o lowe VIX ' caegoies ae posiive, which indicaes ha lowe implied volailiy is a buy signal fo inveso who wan o ake long posiions in he undelying index moe han days. In Chinese make, because of he less daa of implied volailiy index, we focus on he elaionship beween ivix and d, 5d, d, d. In he egession algoihm, he so sample is he fome 5 ading days, denoed T 5, and dividend en classificaion. The egession model ae as follows: R d D D L D () 5d D D L D () d D D L D (3) d D D L D (4) The esimaing oucome is as follows in he Chinese make: TABLE 5 OUTCOME OF FORWARD-LOOKING REGRESSION Coefficien(%) d 5d d d.77(.394) -.64(-.63) -.3(-.9436) -5.39(-.7) -.99(-.48) -.45(-.75) -3.3(-.35) -6.9(-.5684) -.36(-.736) -.68(-.635) -4.9(-.4477) -6.3(-.8779) 3 -.(-.363) -.7(-.5396) -3.4(-.6937) -7.5(-.88)

11 4.7(.66) -.96(-.499) -.8(-.53) -.53(-.34) 5 -.9(-.94) -.4(-.558) -3.54(-.48) -5.46(-.73) 6.3(.8763).5(.4) -.9(-.897) -.4(-.589) 7.7(.4775).4(.473).87(.565).3(.838) (-.596) -.56(-.97) -4.9(-.886) -5.74(-.7549) (-.555) -.4**(-.548) -.56(-.6) -4.34(-.464).7(.36).6(.9).(.8) -7.84***(-3.339).7(.68) -.4(-.76) -5.5(-.9) -.***(-.7) A. R *** means is significan a 99% confidence level; ** means is significan a 95% confidence level; * means is significan a 9% confidence level. Accoding o Table 5, he adjused R of hose egession equaions ae negaive, which indicaes ha he explanaoy vaiables in he egession equaions don' have he powe o explain he explained vaiable. VI. Conclusion We analysis he elaionship beween implied volailiy index and is undelying make index hough saisical analysis and egession analysis in he Chinese make and Ameican make. () We can find fom he saisical analysis ha he elaionship beween VIX nd S&P 5 index is negaive in geneal, he elaionship beween ivix and SSE 5 index is negaive in some peiod. And he sa and end value of ivix ae geae han VIX, ivix is geae han VIX in geneal, he volailiy of VIX of Ameican make is geae han ha's in Chinese make. () Fom he conempoaneous egession beween implied volailiy index change ae and is undelying make index closing pice logaihmic eun, we can find ha in Ameican make, he elaionship beween SPX VIX and is negaive and asymmeic, which indicaes ha VIX index can eflec inveso feas of make downwad, and invesos ae moe sensiive o he ise of VIX index, boh of he VIX and have mean-eveing pocess; In Chinese make, he egess equaion is SPX no significan, he elaionship beween ivix and is asymmeic, SZX ivix has a negaive effec o SZX. (3) Though he egession wih lags beween implied volailiy index change ae and is undelying make index closing pice logaihmic eun, we can find ha in Ameican make, VIX is negaively affeced by VIX, VIX 3 and, SPX SPX, SPX, is negaively affeced by VIX, VIX and SPX, ; In Chinese make, SZX, has a negaive effec o, ivix which indicaes ha he ise of he undelying make index eun can esul o he decease of he implied volailiy nex ading day. (4) We can find fom he fowad-looking egession ha, in Ameican make, when VIX is locaed in he median level, o VIX is exemely high, which indicaes ha i's a buy signal fo

12 inveso who wan o ake long posiions in he undelying index in a sho peiod; in a longe peiod, low implied volailiy is he buy signal. In Chinese make, he explanaoy vaiables don' have he powe o explain he explained vaiable in he egession equaions. In Ameican make, he negaive and asymmeic elaionship beween SPX VIX and, and he VIX's fowad-looking popey, so VIX index is consideed by invesos as an effecive ool o avoid make isks, which is a manifesaion of he developed make ha invesos use he opions and isk pevenion ools effecively. Accoding o he fome analysis, in Chinese make, he elaionship beween ivix and is no significan, and he popey of ivix' fowad-looking can' be SZX veified. hese conclusion may be elaed o he domesic invesmen envionmen and he invesmen behavio of invesos. A pesen, he opions make is no pefec, alhough he SSE 5 ETF opions has launched, bu hee is also exiss some poblems, like ha he cou and he OTC make developmen no balance, and he maching beween opions and fuues make is no high, and he inveso doesn' has he awaeness o avoid isk by SSE 5 ETF opion. Acknowledgemen This wok is suppoed by Naional Naual Science Foundaion of China (NSFC, Gan No.7795), self-deemined eseach funds of CCNU fom he colleges basic eseach and opeaion of MOE(Gan No. CCNU5A) and Chinese Scholaship Council (gan no. 5843). Refeences []Gasineau, G. L.. An index of lised opion pemium[j]. Financial Analyss Jounal, 977, 33(3): []Cox, J. C., Rubinsein, M.. Opions makes[m]. Penice Hall, 985. [3]Whaley. Robe, E.. Deivaives on make volailiy: Hedging ools long ovedue[j]. Jounal of Deivaive, 993, (): [4]Bien, Douglas, and Robe Lizenbege. Opion pices, implied pice pocesses, and sochasic volailiy[j]. Jounal of Finance,, 55(): [5]Fleming. J., Osdied B., Whaley R. E.. Pedicing sock make volailiy: A new measue[j]. Jounal of Fuue Make, 995, 5(3): [6]Maggie M. Copeland, Thomas E. Copeland. Make iming: Syle and size oaion using he VIX[J]. Financial analyss jounal, 999, 55(): [7]Whaley. Robe, E.. The inveso fea gauge[j]. Jounal of Pofolio Managemen,, 6(3): -7. [8]Gio. P.. Relaionship beween implied volailiy indexes and sock index euns[j]. The Jounal of pofolio managemen, 5, 3(3): 9-. [9]Banejee. P S., Doan. J S., Peeson. D R. Implied volailiy and fuue pofolio euns[j]. Jounal of Banking and Finance, 7, 3(): []Hibbe A M., Daigle R T., Dupoye B.. A behavioal explanaion fo he negaive asymmeic eun-volailiy elaion[j]. Jounal of Banking and Finance, 8, 3: []Becke. R., Clemens. A E., McClelland. A.. The jump componen of S&P 5 volailiy and he VIX index[j]. Jounal of Banking and Finance, 9, 33(6): []Chow, K V., Jiang W J., LI. JR. Does VIX uly measue eun volailiy?[j]. SSRN, 4.

13 [3]Black. F., Scholes. M.. The picing of opions and copoae liabiliies[j]. Jounal of Poliical Economy, 973, 8(3): [4]Meon. R C. Theoy of aional opion picing[j]. Bell Jounal of Economics and Managemen Science, 973(Sping), 4(): [5]Whie Pape. The COBE Volailiy Index-VIX[EB/OL]. hps:// [6]Whaley. Robe, E.. Undesanding VIX[J]. hp://papes.ssn.com/sol3/papes.cfm?absac_id=96743.