SSE 50 ETF options
I have four chapters in this thesis, chapter one is the introduction of the paper. The abstract for chapter 2: Using Bakshi, Cao and Chen (2000), and Bakshi and Kapadia’s (2003) methodology, this paper study the Chinese equity index options market that has been developing since 2015. Empirical evidence shows that the market price of call (put) option is generally lower (higher) than the Black-Scholes prices with historical volatility. The prices of the options do not support the one dimensional diffusion model properties. The delta-hedged gains in call (put) options are 61.79% (63.25%) negative. The non-zero delta-hedged gain suggests that the investors are mainly trading on additional volatility risk in the option market in China. The abstract for chapter 3: This paper analyzes the empirical dynamics of the implied volatility (IV) curves of SSE 50 ETF options, the only equity options market in China. We adopt Zhang and Xiang’s (2008) methodology to quantify the IV curve and find it exhibits a right skewed smirk slope, which is different to the left skewed IV smirk shape commonly exhibited in US and international equity option markets. The IV curve becomes more right skewed during the GFC in 2015 and clams to symmetry after-hand. We show that the variation in the SSE 50 ETF options is explained by investors’ sentiments. The abstract for chapter 4: We introduce and evaluate the China Volatility Index (CNVIX), a model free volatility index for the Chinese equity market based on the ETF options in China. We extend the Chicago Board Options Exhcnage's methodology for the Volatility Index (VIX) by interpolating-extrapolating the option dataset in the newly established options market in China. We also evaluate the CNVIX's leverage effect and its return forecastability. We find a strong negative asymmetric leverage effect in the CNVIX and a positive mean volatility risk premium (VRP), which can predict the underlying ETF's daily, weekly and two-weekly returns.
Advisor: Zhang, Jin; Eric, Tan; Zheyao, Pan; Sebastian, Gehricke; Xinfeng, Ruan
Degree Name: Doctor of Philosophy
Degree Discipline: Accountancy and Finance
Publisher: University of Otago
Keywords: ETF; Options; Implied volatility; model-free volatility index; Investor sentiment
Research Type: Thesis