Who has volatility information in the index options market?

Doojin Ryu and Heejin Yang

Finance Research Letters, 2019, vol. 30, issue C, 266-270

Abstract: We examine volatility information embedded in the demand for options by analyzing data related to trades and investors. We find that overall demand for volatility in the options market does not predict stock market volatility but that foreign investors’ vega-weighted net demand conveys significant information about future volatility dynamics. Foreign investors use their superior volatility information by trading near-the-money options with high vega values.

Keywords: Market microstructure; Foreign investor; KOSPI200 options; Vega; Volatility information (search for similar items in EconPapers)
JEL-codes: G10 G14 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:30:y:2019:i:c:p:266-270

DOI: 10.1016/j.frl.2018.10.008

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