The Roles of Short-Run and Long-Run Volatility Factors in Options Market: A Term Structure Perspective

2011 ◽  
Author(s):  
Yang-Ho Park
Keyword(s):  
Term Structure ◽  
Options Market ◽  
Long Run ◽  
Short Run

scholarly journals Liquidity-Adjusted Benchmark Yield Curves: A Look at Trading Concentration and Information

2007 ◽  
Vol 10 (04) ◽  
pp. 491-518 ◽  
Author(s):  
William T. Lin ◽  
David S. Sun
Keyword(s):  
Term Structure ◽  
Yield Curve ◽  
Information Discovery ◽  
Affine Term Structure ◽  
Term Structure Model ◽  
Long Run ◽  
Fitting Method ◽  
Bond Issues ◽  
Short Run

Estimation of benchmark yield curve in developing markets is often influenced by liquidity concentration. Based on an affine term structure model, we develop a long run liquidity weighted fitting method to address the trading concentration phenomenon arising from horizon-induced clientele equilibrium as well as information discovery. Specifically, we employ arguments from models of liquidity concentration and benchmark security information. After examining time series behavior of price errors against our fitted model, we find results consistent with both the horizon and information hypotheses. Our evidence indicates that trading liquidity carries information effect in the long run, which cannot be fully captured in the short run. Trading liquidity plays a key role in long run term structure fitting. Markets for liquid benchmark government bond issues collectively form a long term equilibrium. Compared with previous studies, our results provide a robust and realistic characterization of the spot rate term structure and related price forecasting over time, which in turn help portfolio investment of fixed income and long run pricing of financial instruments.

Long-run versus short-run news and the term structure of equity

2020 ◽  
Vol 36 ◽  
pp. 101336
Author(s):  
Matthijs Breugem ◽  
Roberto Marfè
Keyword(s):  
Term Structure ◽  
Long Run ◽  
Short Run

scholarly journals Term Structure of Interest Rates with Short-run and Long-run Risks

2015 ◽  
Vol 2015 (95) ◽  
pp. 1-61
Author(s):  
Olesya Grishchenko ◽  
Zhaogang Song ◽  
Hao Zhou
Keyword(s):  
Interest Rates ◽  
Term Structure ◽  
Long Run ◽  
Short Run ◽  
Long Run Risks

scholarly journals Ideal Investment Protection in Optimistic Perceptions: Evidence From the Indian Equity Options Market

2021 ◽  
Vol 12 (2) ◽  
pp. 327
Author(s):  
Babu Jose ◽  
James Varghese
Keyword(s):  
Stock Exchange ◽  
Risk Mitigation ◽  
Recovery Phase ◽  
Minimum Variance ◽  
Options Market ◽  
Equity Options ◽  
Investment Protection ◽  
Long Run ◽  
Short Run ◽  
The Ideal

The study is an experiential assessment on the ability of the Indian equity options market to resist the adverse impacts that arise from unexpected changes in the underlying equity market, focusing on two distinct investor perceptions within optimistic dimension in the market, viz. the recovery phase and the growth phase, which were evident in the Indian market scenario post the period of financial upheavals due to global economic crisis during the latter half of 2000s. The risk mitigation capability of the options is examined in terms of long run integration and short run re-equilibrating relationship shown by near month calls and puts with varied stages of exercisability with their underlying equity segment in the National Stock Exchange of India. Further, the ideal hedge sizes of the options and the hedge gains resulting from affecting them in the investment profile are identified under minimum variance framework, using Diagonal BEKK GARCH. The results are indicative that all different options segments express to have the expected resistance ability during both bullish perceptions under consideration, and prove that optimal use of options with equity portfolio provides assured hedge gains in terms of reduction in un-anticipatable variances.

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