Purpose The purpose of this paper is to understand the patterns of the implied volatility (IV) of the Indian index option market and its relationship with moneyness (called the volatility smile). Its goal is also to ascertain the determinants of IV. Design/methodology/approach For this purpose,...

Purpose – The purpose of this paper is to examine the statistical properties of the volatility index of India, India Vix (Ivix), its relationship with the Indian stock market and its predictive power for forecasting future variance. Further, the paper examines the volatility transmission...

Purpose – The purpose of this paper is to introduce a model to measure foreign exchange (FX) rate volatility accurately. The FX rate volatility forecasting is a crucial endeavour in financial markets and has gained the attention of researchers and practitioners over the last several decades....

Purpose – This paper aims to describe a robust empirical approach to generating plausible historically based interest rate shocks, which can be applied to any market environment. These interest rate shocks can be readily linked to movements in other key risk factors, and used to measure market...

Purpose – The aim of this study is to examine the “volatility smile” or/and “skew”, term structure and implied volatility surfaces based on those European options written in the standard and poor (S&P) Nifty equity index. The stochastic nature of implied volatility across strike price,...

Purpose – Due to disequilibrium between supply and demand in the option market, the option market‐maker is under exposure to certain risks because of their net option positions. This paper aims to pay attention to whether the risk award affects the option price and the shape of implied...

Purpose – The purpose of this paper is to understand that option pricing is the response of option implied volatility (IV) to macroeconomic announcements. Design/methodology/approach – The authors use high-frequency data on ASX SPI 200 index options to examine the response of option IV, as...

Purpose – The purpose of this paper is to propose a new method for estimating continuous‐time stochastic volatility (SV) models for the S&P 500 stock index process using intraday high‐frequency observations of both the S&P 500 index and the Chicago Board Options Exchange (CBOE) implied (or...

Abstract Against the background of the global financial crisis, we review recent literature on the debate about “too big to fail”. This is (still) one of the key issues in banking literature since it determines the conditions for adequate banking regulation, financial stability and economic...

Abstract We study the impact of central clearing of over-the-counter (OTC) transactions on counterparty exposures in a market with OTC transactions across several asset classes with heterogeneous characteristics. The impact of introducing a central counterparty (CCP) on expected interdealer...