Relationship of the Change in Implied Volatility with the Underlying Equity Index Return in Thailand

Supachok Thakolsri (), Yuthana Sethapramote and Komain Jiranyakul ()
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Supachok Thakolsri: Public Enterprise Policy Office, Ministry of Finance, Bangkok, Thailand
Komain Jiranyakul: School of Development Economics, National Institute of Development Administration, Bangkok, Thailand

Economic Research Guardian, 2016, vol. 6, issue 2, 74-86

Abstract: In this study, we examine the relationship between the change in implied volatility index and the underlying stock index return in the Thai stock market. The data used are daily data during November 2010 to December 2013. The regression analysis is performed on stationary series. The empirical results reveal that there is evidence of significantly negative and asymmetric relationship between the underlying stock index return and the change in implied volatility. In addition, the size effect of the underlying stock index return and the one-period lagged implied volatility change also affect the change in implied volatility. The finding in this study gives implication for risk management.

Keywords: Equity index return; Option prices; Implied volatility; Asymmetric effect (search for similar items in EconPapers)
JEL-codes: C22 C32 G15 (search for similar items in EconPapers)
Date: 2016
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Related works:
Working Paper: Relationship of the change in implied volatility with the underlying equity index return in Thailand (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:wei:journl:v:6:y:2016:i:2:p:74-86

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