재무연구 제 권 호 (2011년 9월)
Asian Review of Financial Research, Vol., No..
pp.224~263
pp.224~263
Order Imbalances in Options and Volatility Risk Premium on Equity Index
Chin-Ho Chen Graduate Institute of Finance, National Chiao Tung University, Taiwan.
Huimin Chung Graduate Institute of Finance, National Chiao Tung University, Taiwan.
Wen-Liang G. Hsieh Graduate Institute of Finance, National Chiao Tung University, Taiwan.
Shu-Fang Yuan Graduate Institute of Finance, National Chiao Tung University, Taiwan.
This study explores the impact of aggregate daily order imbalances in options on volatility risk premium on its underlying index. Two types of volatility risk premium, ex-post and ex-ante volatility risk premiums, are included to address this issue. Based on Taiwan stock index and options (TXO) data over the period from January 1, 2005 to December 31, 2009, several interesting results emerge. First, order imbalances in near-month options, especially for call options’, have a predominant influence on ex-post and ex-ante volatility risk premiums. Next, order imbalances of near-month options in either direction, excess buy orders or excess sell order, have distinct effect on volatility risk premium. Overall, the increased level of excess buy orders drives ex-post and ex-ante volatility risk premiums upward, but downward only for excess sell orders in call options. Finally, ex-post and ex-ante volatility risk premiums are positively related to order imbalances of near-month options in respond to continuous price variations. Nonetheless, there is no significant relation for index price jumps.
Chin-Ho Chen
Huimin Chung
Wen-Liang G. Hsieh
Shu-Fang Yuan
This study explores the impact of aggregate daily order imbalances in options on volatility risk premium on its underlying index. Two types of volatility risk premium, ex-post and ex-ante volatility risk premiums, are included to address this issue. Based on Taiwan stock index and options (TXO) data over the period from January 1, 2005 to December 31, 2009, several interesting results emerge. First, order imbalances in near-month options, especially for call options’, have a predominant influence on ex-post and ex-ante volatility risk premiums. Next, order imbalances of near-month options in either direction, excess buy orders or excess sell order, have distinct effect on volatility risk premium. Overall, the increased level of excess buy orders drives ex-post and ex-ante volatility risk premiums upward, but downward only for excess sell orders in call options. Finally, ex-post and ex-ante volatility risk premiums are positively related to order imbalances of near-month options in respond to continuous price variations. Nonetheless, there is no significant relation for index price jumps.
order imbalances,model-free implied volatility,realized volatility,volatility risk premium,HAR (Heterogeneous autoregressive model)
