Abstract

http://ssrn.com/abstract=1711036
 
 

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The Information Content of the S&P 500 Index and VIX Options on the Dynamics of the S&P 500 Index


Chung San-Lin


National Taiwan University

Wei-Che Tsai


National Sun Yat-sen University - Department of Finance

Yaw-Huei Wang


National Taiwan University

Pei-Shih (Pace) Weng


National Dong Hwa University - Department of Finance

November 18, 2010

Journal of Futures Markets

Abstract:     
Given that both S&P 500 index and VIX options essentially contain information on the future dynamics of the S&P 500 index, in this study, we set out to empirically investigate the informational roles played by these two option markets with regard to the prediction of returns, volatility and density in the S&P 500 index. Our results reveal that the information content implied from these two option markets is not identical. In addition to the information extracted from the S&P 500 index options, all of the predictions for the S&P 500 index are significantly improved by the information recovered from the VIX options. Our findings are robust to various measures of realized volatility and methods of density evaluation.

Number of Pages in PDF File: 45

Keywords: VIX options, Index options, Put-call parity, Implied volatility, Implied density.

JEL Classification: C53, G13

Accepted Paper Series


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Date posted: November 20, 2010 ; Last revised: October 1, 2013

Suggested Citation

San-Lin, Chung and Tsai, Wei-Che and Wang, Yaw-Huei and Weng, Pei-Shih (Pace), The Information Content of the S&P 500 Index and VIX Options on the Dynamics of the S&P 500 Index (November 18, 2010). Journal of Futures Markets. Available at SSRN: http://ssrn.com/abstract=1711036 or http://dx.doi.org/10.2139/ssrn.1711036

Contact Information

Chung San-Lin
National Taiwan University ( email )
21 Hsiu Chow Rd
Taipei, 10020
Taiwan
Wei-Che Tsai
National Sun Yat-sen University - Department of Finance ( email )
No.70, Lianhai Rd., Gushan District,
Kaohsiung City
Taiwan
Yaw-Huei Wang (Contact Author)
National Taiwan University ( email )
Department and Graduate Institute of Finance
College of Management
Taipei, 106
Taiwan
+886233661092 (Phone)
+886283695581 (Fax)
Pei-Shih Weng
National Dong Hwa University - Department of Finance ( email )
Hualien
Taiwan
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