Macroeconomic Information and Implied Volatility: Evidence from Australian Index Options
Posted: 26 Aug 2013
Date Written: August 26, 2013
A key issue in understanding option pricing is the response of option implied volatility to macro-economic announcements. We use high frequency data on ASX SPI 200 Index Options to examine the response of option implied volatility, as well as higher moments of the underlying return distribution, to macroeconomic announcements. Additionally, we identify the response of the moments as a function of the moneyness of the options. Our findings suggest that in-the-money and out-of-the money options have different characteristics in their responses, leading to the conclusion that heterogeneity in investor beliefs and preferences affect option implied volatility through the state price density function.
Keywords: Implied Volatility, Options, Macroeconomic Information
JEL Classification: G13, G14, C58
Suggested Citation: Suggested Citation