International Transmission of Uncertainty Implicit in Stock Index Option Prices

29 Pages Posted: 16 Mar 2002

See all articles by Petri Sahlström

Petri Sahlström

University of Oulu

Jussi Nikkinen

University of Vaasa - Department of Accounting and Finance

Date Written: February 27, 2002

Abstract

This study examines international equity market integration regarding uncertainty. For that purpose implied volatilities calculated from the market prices of stock index options from the U.S., U.K., German and Finnish markets are analyzed. The results suggest a high degree of integration among the U.S, U.K. and German markets with respect to uncertainty. The U.S. stock market is the leading source of uncertainty since the changes in uncertainty in the U.S stock market are transmitted to the other markets. The German market is the leading source of uncertainty among the investigated European markets.

Keywords: implied volatility, index options, transmission of uncertainty

JEL Classification: G15

Suggested Citation

Sahlström, Petri and Nikkinen, Jussi, International Transmission of Uncertainty Implicit in Stock Index Option Prices (February 27, 2002). EFA 2002 Berlin Meetings Discussion Paper. Available at SSRN: https://ssrn.com/abstract=302321 or http://dx.doi.org/10.2139/ssrn.302321

Petri Sahlström (Contact Author)

University of Oulu ( email )

P.O. Box 4600
Oulu FIN-90014
Finland

Jussi Nikkinen

University of Vaasa - Department of Accounting and Finance ( email )

P.O. Box 700
FIN-65101 Vaasa, FI-65101
Finland
+358 6 3248541 (Phone)

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