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Information Content of Index Options in Predicting Indian Stock Market Volatility

14 Pages Posted: 9 Jan 2007  

Kartik Shankar

affiliation not provided to SSRN

Dibin Meledath Korath Jr.

affiliation not provided to SSRN

Date Written: November 6, 2006

Abstract

This paper attempts to identify the changes in predictive power by addition of the incremental information contained in the Implied Volatility of the NSE Index options to GARCH and EGARCH models. This is done by adding the implied volatility as an exogenous variable in the GARCH and EGARCH models. The within-sample incremental information content is tested using the Likelihood ratio test. The paper further compares the incremental information in near expiry calls and far expiry calls.

Keywords: GARCH, EGARCH, implied volatility, information content of options

JEL Classification: N25

Suggested Citation

Shankar, Kartik and Korath, Dibin Meledath, Information Content of Index Options in Predicting Indian Stock Market Volatility (November 6, 2006). Available at SSRN: https://ssrn.com/abstract=953449 or http://dx.doi.org/10.2139/ssrn.953449

Kartik Shankar (Contact Author)

affiliation not provided to SSRN ( email )

No Address Available

Dibin Meledath Korath Jr.

affiliation not provided to SSRN ( email )

No Address Available

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