Not Available for Download

The Dynamics of the S&P 500 Implied Volatility Surface

Posted: 27 Mar 2000  

George S. Skiadopoulos

University of Piraeus; Queen Mary, University of London, School of Economics and Finance

Stewart D. Hodges

University of Warwick - Financial Options Research Centre (FORC)

Les Clewlow

Lacima; University of Warwick - Financial Options Research Centre (FORC); University of Technology Sydney (UTS) - School of Finance and Economics

Abstract

This empirical study is motivated by the literature on "smile-consistent" arbitrage pricing with stochastic volatility. We investigate the number and shape of shocks that move implied volatility smiles and surfaces by applying Principal Components Analysis. Two components are identified under a variety of criteria. Subsequently, we develop a "Procrustes" type rotation in order to interpret the retained components. The results have implications for both option pricing and hedging and for the economics of option pricing.

JEL Classification: G13

Suggested Citation

Skiadopoulos, George S. and Hodges, Stewart D. and Clewlow, Les, The Dynamics of the S&P 500 Implied Volatility Surface. Review of Derivatives Research, Vol. 3, No. 3, 1999. Available at SSRN: https://ssrn.com/abstract=217388

George Skiadopoulos (Contact Author)

University of Piraeus ( email )

80 Karaoli & Dimitriou Str.
18534 Piraeus, 185 34 -GR
Greece

HOME PAGE: http://web.xrh.unipi.gr/faculty/gskiadopoulos/

Queen Mary, University of London, School of Economics and Finance

Lincoln's Inn Fields
Mile End Rd.
London, E1 4NS
United Kingdom

Stewart Hodges

University of Warwick - Financial Options Research Centre (FORC) ( email )

Warwick Business School
Coventry CV4 7AL
United Kingdom
01203-523606 (Phone)

Les Clewlow

University of Warwick - Financial Options Research Centre (FORC)

Coventry CV4 7AL
United Kingdom

HOME PAGE: http://www.wbs.ac.uk/expertise/research_teaching/f

University of Technology Sydney (UTS) - School of Finance and Economics ( email )

Haymarket
Sydney, NSW 2007
Australia

HOME PAGE: http://www.business.uts.edu.au/finance/

Lacima ( email )

London
United Kingdom

HOME PAGE: http://www.lacimagroup.com

Paper statistics

Abstract Views
1,765