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The impact of volatility derivatives on S&P500 volatility by Paul Dawson; Sotiris K. Staikouras is a Economics, Econometrics and Finance article available to read on EtoBox.

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## Abstract This study investigates whether the newly cultivated platform of volatility derivatives has altered the volatility of the underlying S&P500 index. The findings suggest that the onset of the volatility derivatives trading has lowered the volatility of both the cash market volatility and the cash market index, and significantly reduced the impact of shocks to volatility. When big sudden events hit financial markets, however, the volatility of volatility seems to elevate in the U.S. equity market as a result of increased global correlations. Regardless of the period under examination and the estimator employed, long‐run volatility persistence is present. The latter drops significantly when the credit crunch period is excluded from the post‐event date sample period. The correlation between the broad equity index and the return volatility remains low, which in turn strengthens the role of volatility derivatives to facilitate portfolio diversification. The analysis also shows that volatility is mean reverting, whereas market data support the impact of information asymmetries on conditional volatility. In the post‐event date phase, no asymmetries are found when the recent cris

Who reads The impact of volatility derivatives on S&P500 volatility?

Author

Paul Dawson; Sotiris K. Staikouras

Publisher

John Wiley and Sons; Wiley (John Wiley & Sons); John Wiley & Sons Inc.; Wiley (ISSN 0270-7314)

Published

2009

Language

EN

Field

Economics, Econometrics and Finance (Social Sciences)