Modelling the heterogeneous relationship between the crude oil implied volatility index and African stocks in the coronavirus pandemic

Crude oil is a global commodity traded across the world market. The prices of the commodity over an extended period for crude oil have been analyzed using daily prices of crude oil futures and the implied volatility index (OVX). This paper aims to find the predictability of various parameters on the basis of time using neural network and quantile regression methods. Several estimates have been shown based on Barone, Adesi, and Whaley’s (BAW) model of neural network. Estimation parameters include opening, closing, highest and lowest price of the commodity and volumes traded for a given commodity on each trading day. The neural network estimates explain that future prices of the WTI/USO can be predicted with minimal error, and similar can be used to predict future volatility. The quantile regression results suggest that crude oil prices and OVX are strongly associated. The asymmetric association between the WTI/USO and OVX explains that the volatility feedback effect holds good for the OVX market. Bai and Perron least squares estimate evidence of the presence of a break in the time series. The main results uncover several interesting facts that implied volatility tends to remain calm during the global financial crises and higher throughout the post crisis period. The empirical outcome on the OVX market provides some practical implications for the trader and investor, in which oil futures can serve better to hedge the crude price volatility. The crude oil producer can short hedge enough through volatility futures and options to maintain the future quantity of crude to be produced.

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Examining Contemporaneous Relationship between Return of Nifty Index and India VIX

International Journal of Financial Management ◽

10.21863/ijfm/2015.5.2.011 ◽

2015 ◽

Vol 5 (2) ◽

Author(s):

Prasenjit Chakrabarti

Keyword(s):

Implied Volatility ◽

Stock Index ◽

Quadratic Effect ◽

Asymmetric Building ◽

Volatility Index ◽

India Vix ◽

The Relationship

The study examines the contemporaneous relationship between Nifty returns and India VIX returns. Literature documents that the relationship between them is negative and asymmetric. Building on this, the study considers the linear and quadratic effect of stock index return (CNX Nifty) and examines the changes in implied volatility index (India VIX). The study finds both linear and quadratic CNX Nifty index returns are significant for changes in the level of India VIX. Findings suggest that India VIX provides insurance both for downside market movement and size of the downside movement.

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An investor sentiment barometer — Greek Implied Volatility Index (GRIV)

Global Finance Journal ◽

10.1016/j.gfj.2012.03.001 ◽

2012 ◽

Vol 23 (2) ◽

pp. 77-93 ◽

Cited By ~ 23

Author(s):

Costas Siriopoulos ◽

Athanasios Fassas

Keyword(s):

Implied Volatility ◽

Investor Sentiment ◽

Volatility Index

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The Information Content of Implied Volatility in the Crude Oil and Natural Gas Markets

Journal of Accounting and Finance ◽

10.33423/jaf.v17i9.893 ◽

2017 ◽

Vol 17 (9) ◽

Keyword(s):

Natural Gas ◽

Crude Oil ◽

Information Content ◽

Implied Volatility ◽

Natural Gas Markets ◽

Oil And Natural Gas ◽

Gas Markets

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ANALYSIS OF MARKET VOLATILITY VIA A DYNAMICALLY PURIFIED OPTION PRICE PROCESS

Annals of Financial Economics ◽

10.1142/s2010495214500067 ◽

2014 ◽

Vol 09 (03) ◽

pp. 1450006 ◽

Cited By ~ 1

Author(s):

CHUONG LUONG ◽

NIKOLAI DOKUCHAEV

Keyword(s):

Stock Price ◽

Implied Volatility ◽

Financial Time Series ◽

Option Price ◽

Option Prices ◽

Price Process ◽

Volatility Index ◽

Quadratic Interpolation ◽

Dynamic Estimation ◽

The Impact

The paper studies methods of dynamic estimation of volatility for financial time series. We suggest to estimate the volatility as the implied volatility inferred from some artificial "dynamically purified" price process that in theory allows to eliminate the impact of the stock price movements. The complete elimination would be possible if the option prices were available for continuous sets of strike prices and expiration times. In practice, we have to use only finite sets of available prices. We discuss the construction of this process from the available option prices using different methods. In order to overcome the incompleteness of the available option prices, we suggests several interpolation approaches, including the first order Taylor series extrapolation and quadratic interpolation. We examine the potential of the implied volatility derived from this proposed process for forecasting of the future volatility, in comparison with the traditional implied volatility process such as the volatility index VIX.

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Hedging the risk of travel and leisure stocks: The role of crude oil

Tourism Economics ◽

10.1177/1354816620922625 ◽

2020 ◽

pp. 135481662092262

Author(s):

Naji Jalkh ◽

Elie Bouri ◽

Xuan Vinh Vo ◽

Anupam Dutta

Keyword(s):

Crude Oil ◽

Implied Volatility ◽

Stock Index ◽

Model Specification ◽

The United Kingdom ◽

Crude Oil Prices ◽

Oil Markets ◽

Hedge Ratios ◽

Correlation Process

Unlike previous studies, we examine which of the implied volatilities of US stock and crude oil markets are more suitable and effective hedge for the downside risk of US travel and leisure (T&L) stocks. Using the corrected dynamic conditional correlation process, the results show that the T&L stock index is more negatively and more consistently correlated with the implied volatility of crude oil prices, suggesting that the oil implied volatility is a more suitable hedging asset. Similar results are reported for France, the United Kingdom, and developed markets. They are robust to the frequency of the data and model specification. Furthermore, the hedge ratios vary over time, which requires a regular update of hedged positions. Importantly, the highest hedge effectiveness is associated with the oil implied volatility.

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