Volatility in covered warrants - A comparison between EGARCH-forecasted volatility and implied volatility on the Swedish warrant market -
(2008)Department of Economics
- Abstract
- "The aim of this thesis is to study the implied volatility on certain warrants on the Nordic Derivatives Exchange and compare it to an EGARCH-forecasted volatility (which throughout the thesis is used as proxy for the true volatility by the authors) in order to see if the difference follows a specific pattern."
The difference between the forecasted volatility and the implied volatility fluctuates across moneyness and the lifetime of the warrant. A number of patterns are detected across the two parameters, which in turn might be caused by the market maker’s behavior towards market uncertainties. In addition to this, a “ratio-smile” trend over time was detected on several warrants. That is, the ratio (implied volatility over forecasted... (More) - "The aim of this thesis is to study the implied volatility on certain warrants on the Nordic Derivatives Exchange and compare it to an EGARCH-forecasted volatility (which throughout the thesis is used as proxy for the true volatility by the authors) in order to see if the difference follows a specific pattern."
The difference between the forecasted volatility and the implied volatility fluctuates across moneyness and the lifetime of the warrant. A number of patterns are detected across the two parameters, which in turn might be caused by the market maker’s behavior towards market uncertainties. In addition to this, a “ratio-smile” trend over time was detected on several warrants. That is, the ratio (implied volatility over forecasted volatility) is higher at the beginning and the end of the lifetime of the warrant compared to the middle of the lifetime (which coincided with an increase in moneyness). (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/1335281
- author
- Domarchi Veliz, Felipe and Heinrup, Per
- supervisor
- organization
- year
- 2008
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- volatility, EGARCH, Warrants, Black and Scholes, Economics, econometrics, economic theory, economic systems, economic policy, Nationalekonomi, ekonometri, ekonomisk teori, ekonomiska system, ekonomisk politik
- language
- English
- id
- 1335281
- date added to LUP
- 2008-06-05 00:00:00
- date last changed
- 2010-08-03 10:51:45
@misc{1335281,
abstract = {{"The aim of this thesis is to study the implied volatility on certain warrants on the Nordic Derivatives Exchange and compare it to an EGARCH-forecasted volatility (which throughout the thesis is used as proxy for the true volatility by the authors) in order to see if the difference follows a specific pattern."
The difference between the forecasted volatility and the implied volatility fluctuates across moneyness and the lifetime of the warrant. A number of patterns are detected across the two parameters, which in turn might be caused by the market maker’s behavior towards market uncertainties. In addition to this, a “ratio-smile” trend over time was detected on several warrants. That is, the ratio (implied volatility over forecasted volatility) is higher at the beginning and the end of the lifetime of the warrant compared to the middle of the lifetime (which coincided with an increase in moneyness).}},
author = {{Domarchi Veliz, Felipe and Heinrup, Per}},
language = {{eng}},
note = {{Student Paper}},
title = {{Volatility in covered warrants - A comparison between EGARCH-forecasted volatility and implied volatility on the Swedish warrant market -}},
year = {{2008}},
}