This article empirically analyzes some properties by all one-dimensional diffusion option models by using the martingale restriction test and examines the systematic risk factors Implied In return dynamics of KOSPI 200 index options. We find that the martingale restriction under one-dimensional diffusion option model is strongly rejected by the data because of the negative volatility risk premium. Therefore options are not redundant securities, nor monotonically increasing (decreasing) in the underlying asset price and also option prices are not perfectly correlated with each other and with the underlying asset. And under the non-complete of the market. the informational led-lag relationship between the stock indices and the stock index options exist.
Research Article|
November 30 2007
A Study on the Return Dynamics using the Implied Information
Tae Hun Kang
Tae Hun Kang
Pusan National University
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Publisher: Emerald Publishing on behalf of Korea Derivatives Association
Online ISSN: 2713-6647
Print ISSN: 1229-988X
© 2007 Emerald Publishing Limited
2007
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Journal of Derivatives and Quantitative Studies: Seonmul yeon’gu (2007) 15 (2): 55–83.
Citation
Kim MS, Kang TH (2007), "A Study on the Return Dynamics using the Implied Information". Journal of Derivatives and Quantitative Studies: Seonmul yeon’gu, Vol. 15 No. 2 pp. 55–83, doi: https://doi.org/10.1108/JDQS-02-2007-B0003
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