Posts Tagged ‘index

14
Jul
11

Paper: Opciones sobre ETFs y Volatilidad Implicita

The Implied Volatility of ETF and Index Options

Abstract: 
We examine the option-implied volatility of the three most liquid ETFs (Diamonds, Spiders, and Cubes) and their respective tracking indices (Dow 30, S&P 500, and NASDAQ 100). We find that volatility smiles for ETF options are more pronounced than for index options, primarily because deep-in-themoney ETF options have considerably higher implied volatility than deep-in-the-money index options. The observed difference in implied volatility is not due to a difference between the realized return distributions of the underlying ETFs and indices. Differences in implied volatility for ETF and index options also do not appear to be explained by discrepancies in net buying pressure, as theorized by Bollen and Whaley (2004).

Link al Paper

27
May
11

Fun & Finance: Capítulo 9, Acciones Argentinas

En este capítulo -que introduce la tematica de acciones-, Hector le cuenta a Gaston como fue el año 2010 para el MERVAL, cuales fueron las estrellas de ese año. Y lo mas importante, como empezar a ver si una accion esta barata.

08
Feb
11

Paper: Correlación en tiempos de crisis

Correlation of financial markets in times of crisis

Abstract

Using the eigenvalues and eigenvectors of correlations matrices of some of the main financial market indices in the world, we show that high volatility of markets is directly linked with strong correlations between them. This means that markets tend to behave as one during great crashes. In order to do so, we investigate several financial market crises that occurred in the years 1987 (Black Monday), 1989 (Russian crisis), 2001 (Burst of the dot-com bubble and September 11), and 2008 (Subprime Mortgage Crisis), which mark some of the largest downturns of financial markets in the last three decades.

Link al Paper

18
Sep
10

Paper: Correlación y el SPY

Intraday Correlation Patterns between the S&P 500 and Sector Indices

Abstract:
In this brief research note, I explore recent patterns in intraday return and volume correlation between the S\&P 500 and sector indices, as represented by minutely data from Aug. 23 to Sep. 10 for the SPDR exchange-traded funds. Notably, there appears to be evidence of two previously unreported patterns in intraday correlation. First, there is a “U-shaped” trend in return correlation, characterized by higher correlation at open and close and lower correlation during mid-day hours. Second, volume correlation is marked by lower values in the morning and increasing values in the afternoon. In some cases, this trend even takes the infamous “hockey-stick” shape, exhibiting stable values in the morning but sharply increasing values in the late afternoon. To ensure that these patterns are not a function of the choice of correlation window size, I confirm that these patterns are qualitatively stable over correlation windows ranging from 10 minutes to 90 minutes. These findings indicate that non-time-stationary patterns exist not only for volume and volatility, as previously reported, but also for the correlation of return and volume between the market and sector indices. These results have possible implications for intraday market efficiency and for trading strategies that rely on intraday time-stationarity of return or volume correlation.

Link al Paper

13
Sep
10

Paper: Consecuencias de la inversión atada a los indices

On the Economic Consequences of Index-Linked Investing

Abstract:
Trillions of dollars are invested through index funds, exchange-traded funds, and other index derivatives. The benefits of index-linked investing are well-known, but the possible broader economic consequences are unstudied. I review research which suggests that index-linked investing is distorting stock prices and risk-return tradeoffs, which in turn may be distorting corporate investment and financing decisions, investor portfolio allocation decisions, fund manager skill assessments, and other choices and measures. These effects may intensify as index-linked investing continues to grow in popularity.

Link al Paper

14
Apr
10

Entendiendo Volatilidad

En un reciente post de Daily Options Report –donde se vuelve a analizar el rol del VIX-, Adam Warner ilumina el escenario de como leer correctamente la volatilidad.

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buyers do step in for “cheap” volatility. And get their faces ripped off. Cheap is only relative to the volatility of the underlying instrument. And if the underlying is not moving, you better watch out buying paper. Everyone learns this lesson the hard way.

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Even though it ostensibly looks forward 30 days, the VIX does a better job telling you what already happened than what’s up in the future. About 3/4 of the VIX level is explained by the recent past and 1/4 is a forward looking estimate. And often an obvious one, like the Fed’s about to speak, the market may move.

(…)

You have 10 options screens in front of you, each with individual stock volatility doing all sorts of things in all sorts of time frames. Not to mention the stocks themselves doing what they do.The VIX is the narrowest of measures, it’s 30 day volatility on one index. It’s a terrific proxy to give you an impression of what’s doing in volatility in the blink of an eye, but it tells a tiny fractiion of the whole story and thus should not be treated as some sort of gospel to the penny.

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02
Apr
10

Paper: Rebalanceo y Performance

Fundamental Indexation: Rebalancing Assumptions and Performance

Abstract:
We show that the performance of a fundamental index with annual rebalancing, as proposed by Arnott, Hsu and Moore (2005), can be highly sensitive to the subjective choice of when to rebalance. Although performance differences between fundamental indexes rebalanced at different dates tend to be small in the long run, they can be substantial at shorter horizons. For the year 2009, for example, we find that a fundamental index rebalanced every March outperformed the capitalization-weighted index by over 10%, whereas a fundamental index rebalanced every September underperformed. This performance ambiguity is an undesirable feature for an index which is used for benchmarking purposes. We introduce the idea of blending multiple underlying fundamental indexes, each one rebalanced annually, but at different dates, as an example of how to construct a more robust fundamental index without increasing turnover.

Link al Paper




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"It is hard to be finite upon an infinite subject, and all subjects are infinite." Herman Melville

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