Calculation of VIX under Irrational Quotes in Options

• Main Authors: Chih-Li Lai, 賴志禮
• Other Authors: Horng-Shing Lu
• Format: Others
• Language: zh-TW
• Published: 2008
• Online Access: http://ndltd.ncl.edu.tw/handle/19255570587459724412

碩士 === 國立交通大學 === 統計學研究所 === 96 === In the complicated financial market, investors pay more and more attention to risk management. Volatility index (VIX) is one of the most important indicators of the risk measurement. The volatility index is calculated not only in the Chicago Board Options Exchange (CBOE) but also calculated in the exchanges of the whole world for their important stock index. The volatility index is calculated from the weighted average of option prices. However, many important financial assets which are traded in the option market are not elaborated in the concept of volatility index. One of the main reasons is that these option prices bear irrational quotes. Under condition that market information is known, the volatility implied on option price can be calculated from an option pricing model, which put forth the possible detection of the irrational option price. This thesis proposes a methodology based on statistics to find the irrational implied volatilities and pursue a better modification. The new CBOE VIX can be applied in the calculation of the volatility index. Take the Taiwan Stock Exchange Capitalization Weighted Stock Index (TAIEX) for example, we can find the irrational quotes effectively that apply the proposed methodology. Henceforth, our irrational reaction of the important financial information can be successfully detected by our proposed methodology in the mature financial market.