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dc.contributor.advisorZhang, Jin
dc.contributor.advisorGehricke, Sebastian
dc.contributor.authorLi, Jianhui
dc.date.available2019-01-27T19:58:26Z
dc.date.copyright2018
dc.identifier.citationLi, J. (2018). How Do US Options Traders ‘Smirk’ on China? Evidence from FXI Options (Thesis, Master of Business). University of Otago. Retrieved from http://hdl.handle.net/10523/8794en
dc.identifier.urihttp://hdl.handle.net/10523/8794
dc.description.abstractMotivated by the rising attention to the Chinese equity and equity options markets, we investigate the shape and dynamics of the implied volatility (IV) curve of options written on the FXI, the FTSE/Xinhua China 50 Index exchange-traded fund (ETF). The FXI options market is the largest and most active China-targeted options market. We demonstrate that the IV curve of FXI options can be quantified by three factors, the level, slope and curvature, by adopting the methodology of Zhang and Xiang (2008), and usually has a smirk shape. We further study the term structure of the IV factors and find that, on average, the smirk becomes steeper and more convex as the maturity of the options increases. Throughout our sample the level and curvature are usually positive and the slope is usually negative. The term structure of the level is upward sloping, while those of the slope and curvature are downward sloping. The implications of our findings also provide empirical features that an FXI option pricing model must be able to produce, namely the average risk-neutral volatility, skewness and excess kurtosis need to be positive, negative and slightly positive, respectively. Lastly, we provide evidence that the information in the quantified IV factors have some predictive power for the monthly FXI ETF returns, in and out of sample.
dc.format.mimetypeapplication/pdf
dc.language.isoen
dc.publisherUniversity of Otago
dc.rightsAll items in OUR Archive are provided for private study and research purposes and are protected by copyright with all rights reserved unless otherwise indicated.
dc.subjectFXI options
dc.subjectFXI options
dc.subjectChina equities
dc.subjectImplied volatility
dc.subjectFXI smirk
dc.subjectChina equities
dc.subjectImplied volatility
dc.subjectFXI smirk
dc.titleHow Do US Options Traders "Smirk" on China? Evidence from FXI Options
dc.typeThesis
dc.date.updated2019-01-26T23:37:35Z
dc.language.rfc3066en
thesis.degree.disciplineDepartment of Accounting and Finance
thesis.degree.nameMaster of Business
thesis.degree.grantorUniversity of Otago
thesis.degree.levelMasters
otago.openaccessOpen
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