THREE-POINT VOLATILITY SMILE CLASSIFICATION: EVIDENCE FROM THE WARSOW STOCK EXCHANGE DURING VOLATILE SUMMER 2011
This paper studies the behavior of the smile in the Warsaw Stock Exchange (WSE) during the volatile summer of 2011.We investigate the volatility smile derived from liquid call and put options on the Polish WIG20 index which option series expired on September 2011. In this period, the polish index h...
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http://www.elsevier.es/es-revista-investigaciones-europeas-direccion-economia-empresa-345-resumen-clasificacion-las-sonrisas-volatilidad-segun-90372437
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doaj-26899efcc2084b04ae61edc1a49efe252020-11-24T22:36:50ZengElsevierInvestigaciones Europeas de Dirección y Economía de la Empresa1135-25232015-01-012111725http://dx.doi.org/10.1016/j.iedee.2013.09.00512345THREE-POINT VOLATILITY SMILE CLASSIFICATION: EVIDENCE FROM THE WARSOW STOCK EXCHANGE DURING VOLATILE SUMMER 2011García-Machado, Juan J.0Rybczyński, Jarosław 1 García-Machado, Juan J. : University of Huelva, Plaza de La Merced, 11, E-21071 Huelva, Spain machado@uhu.es Rybczyński, Jarosław : University of Silesia In Katowice, Ul. 75 PulkuPiechoty 1, 11, 41-500 Chorzów, Poland jaroslaw.rybczynski@wp.pl This paper studies the behavior of the smile in the Warsaw Stock Exchange (WSE) during the volatile summer of 2011.We investigate the volatility smile derived from liquid call and put options on the Polish WIG20 index which option series expired on September 2011. In this period, the polish index has dropped about 20% in two weeks time. By linear interpolation, implied volatilities for moneyness points needed were calculated, then we construct 355 smile curves for calls and puts options to study and make some kind of smile-types classification. We propose seventeen types-smiles which represent all possible cases of three points (three moneynesses) graphical patterns. This classification is made basing upon relationship higher/equal/lower values of implied volatility for each of three points. Furthermore, we distinguish the convexity of pattern. We can note that smiles, smirks and ups are convex in shape, while reversed ones and downs are concave functions. http://www.elsevier.es/es-revista-investigaciones-europeas-direccion-economia-empresa-345-resumen-clasificacion-las-sonrisas-volatilidad-segun-90372437 OptionsVolatility smileImplied volatilitySmile effectSkewnessMoneynessWIG20 |
collection |
DOAJ |
language |
English |
format |
Article |
sources |
DOAJ |
author |
García-Machado, Juan J. Rybczyński, Jarosław |
spellingShingle |
García-Machado, Juan J. Rybczyński, Jarosław THREE-POINT VOLATILITY SMILE CLASSIFICATION: EVIDENCE FROM THE WARSOW STOCK EXCHANGE DURING VOLATILE SUMMER 2011 Investigaciones Europeas de Dirección y Economía de la Empresa Options Volatility smile Implied volatility Smile effect Skewness Moneyness WIG20 |
author_facet |
García-Machado, Juan J. Rybczyński, Jarosław |
author_sort |
García-Machado, Juan J. |
title |
THREE-POINT VOLATILITY SMILE CLASSIFICATION: EVIDENCE FROM THE WARSOW STOCK EXCHANGE DURING VOLATILE SUMMER 2011 |
title_short |
THREE-POINT VOLATILITY SMILE CLASSIFICATION: EVIDENCE FROM THE WARSOW STOCK EXCHANGE DURING VOLATILE SUMMER 2011 |
title_full |
THREE-POINT VOLATILITY SMILE CLASSIFICATION: EVIDENCE FROM THE WARSOW STOCK EXCHANGE DURING VOLATILE SUMMER 2011 |
title_fullStr |
THREE-POINT VOLATILITY SMILE CLASSIFICATION: EVIDENCE FROM THE WARSOW STOCK EXCHANGE DURING VOLATILE SUMMER 2011 |
title_full_unstemmed |
THREE-POINT VOLATILITY SMILE CLASSIFICATION: EVIDENCE FROM THE WARSOW STOCK EXCHANGE DURING VOLATILE SUMMER 2011 |
title_sort |
three-point volatility smile classification: evidence from the warsow stock exchange during volatile summer 2011 |
publisher |
Elsevier |
series |
Investigaciones Europeas de Dirección y Economía de la Empresa |
issn |
1135-2523 |
publishDate |
2015-01-01 |
description |
This paper studies the behavior of the smile in the Warsaw Stock Exchange (WSE) during the volatile summer of 2011.We investigate the volatility smile derived from liquid call and put options on the Polish WIG20 index which option series expired on September 2011. In this period, the polish index has dropped about 20% in two weeks time. By linear interpolation, implied volatilities for moneyness points needed were calculated, then we construct 355 smile curves for calls and puts options to study and make some kind of smile-types classification. We propose seventeen types-smiles which represent all possible cases of three points (three moneynesses) graphical patterns. This classification is made basing upon relationship higher/equal/lower values of implied volatility for each of three points. Furthermore, we distinguish the convexity of pattern. We can note that smiles, smirks and ups are convex in shape, while reversed ones and downs are concave functions.
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topic |
Options Volatility smile Implied volatility Smile effect Skewness Moneyness WIG20 |
url |
http://www.elsevier.es/es-revista-investigaciones-europeas-direccion-economia-empresa-345-resumen-clasificacion-las-sonrisas-volatilidad-segun-90372437
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work_keys_str_mv |
AT garciamachadojuanj threepointvolatilitysmileclassificationevidencefromthewarsowstockexchangeduringvolatilesummer2011 AT rybczynskijarosław threepointvolatilitysmileclassificationevidencefromthewarsowstockexchangeduringvolatilesummer2011 |
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