Advanced

Volatility in covered warrants - A comparison between EGARCH-forecasted volatility and implied volatility on the Swedish warrant market -

Domarchi Veliz, Felipe and Heinrup, Per (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:
author
Domarchi Veliz, Felipe and Heinrup, Per
supervisor
organization
year
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
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},
  keyword      = {volatility,EGARCH,Warrants,Black and Scholes,Economics, econometrics, economic theory, economic systems, economic policy,Nationalekonomi, ekonometri, ekonomisk teori, ekonomiska system, ekonomisk politik},
  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},
}