Options listing and the volatility of the underlying asset: a study on the derivative market function

Marc Chesney and William Eid Júnior

RAE - Revista de Administração de Empresas, 1996, vol. 36, issue 1

Abstract: There are basic misunderstandings on derivative markets. Some professionals believe that they are a kind of casinos and have no utility for the investors. This work looks at the effects of options introductionin the Brazilian market, seeking for another benefit for this introduction: changes in the stocks risk leveI. Our results are the same found in the USand other markets: the options introduction reduces the stocks volatility.We also found that there is a slight indication that the volatility becames more stochastic with this alternative.

Date: 1996
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