India VIX: Examining the Negative and Asymmetric Volatility Index – Market Return Relationship

2012 ◽  
Author(s):  
Gangineni Dhananjhay ◽  
Raghunatha Reddy ◽  
Dr. T. N. L. Prasad
Keyword(s):  
Asymmetric Volatility ◽  
Market Return ◽  
Volatility Index ◽  
India Vix

Examining Contemporaneous Relationship between Return of Nifty Index and India VIX

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.

scholarly journals The Behavior of Option’s Implied Volatility Index: a Case of India VIX

2015 ◽  
Vol 16 (2) ◽  
pp. 149-158 ◽  
Author(s):  
Imlak Shaikh ◽  
Puja Padhi
Keyword(s):  
Implied Volatility ◽  
Negative Impact ◽  
Practical Implication ◽  
Stock Market Volatility ◽  
Put Options ◽  
Monday Effect ◽  
Volatility Index ◽  
Significant Negative Impact ◽  
Day Of The Week ◽  
India Vix

The aim of this paper is to investigate the behavior of implied volatility in the form of day-of-the-week, year-of-the-month and surround the expiration of options. The persistence of volatility is modeled in ARCH/GARCH type framework. The empirical results have shown significant effects of the day-of-the-week, month-of-the-year and day of options expiration. The positive significant Monday effect explains that India VIX rises significantly on the initial days of the market opening, and the significant negative Wednesday effect shows that expected stock market volatility fall through Wednesday-Friday. Moreover, the study reveals the fact on options expiration, the evidence shows that India VIX fall significantly on the day of expiration of European call and put options. The March and December months have reported significant negative impact on the volatility index. Certainly, this kind of results holds practical implication for volatility traders, and helps to the market participant in hedging and pricing of options.

scholarly journals Leverage and Volatility Feedback Effects and Conditional Dependence Index: A Nonparametric Study

2018 ◽  
Author(s):  
Yiguo Sun ◽  
Ximing Wu
Keyword(s):  
Tail Dependence ◽  
Dependence Structure ◽  
Market Returns ◽  
Dependence Relation ◽  
Feedback Effects ◽  
Conditional Dependence ◽  
Market Return ◽  
Volatility Index ◽  
Copula Method ◽  
Volatility Feedback

This paper studies the contemporaneous relationship between S&P 500 index returns and log-increments of the market volatility index (VIX) via a nonparametric copula method. Specifically, we propose a conditional dependence index to investigate how the dependence between the two series varies across different segments of the market return distribution. We find that: (a) the two series exhibit strong, negative, extreme tail dependence; (b) the negative dependence is stronger in extreme bearish markets than in extreme bullish markets; (c) the dependence gradually weakens as the market return moves toward the center of its distribution, or in quiet markets. The unique dependence structure supports the VIX as a barometer of markets' mood in general. Moreover, applying the proposed method to the S&P 500 returns and the implied variance (VIX²), we find that the nonparametric leverage effect is much stronger than the nonparametric volatility feedback effect, although, in general, both effects are weaker than the dependence relation between the market returns and the log-increments of the VIX.

On the relationship between implied volatility index and equity index returns

2016 ◽  
Vol 43 (1) ◽  
pp. 27-47 ◽  
Author(s):  
Imlak Shaikh ◽  
Puja Padhi
Keyword(s):  
Implied Volatility ◽  
Stock Index ◽  
Financial Assets ◽  
Content Type ◽  
Market Opening ◽  
Volatility Index ◽  
India Vix ◽  
High Level ◽  
Equity Index ◽  
Japan And China

Purpose – The purpose of this paper is to analyze the asymmetric contemporaneous relationship between implied volatility index (India VIX) and Equity Index (S & P CNX Nifty Index). In addition, the study also analyzes the seasonality of implied volatility index in the form of day-of-the-week effects and option expiration cycle. Design/methodology/approach – This study employs simple OLS estimation to analyze the contemporaneous relationship among the volatility index and stock index. In order to obtain robust results, the analysis has been presented for the calendar years and sub-periods. Moreover, the international evidenced presented for other Asian markets (Japan and China). Findings – The empirical evidences reveal a strong persistence of asymmetry among the India VIX and Nifty stock index, at the same time the magnitude of asymmetry is not identical. The results show that the changes in India VIX occur bigger for the negative return shocks than the positive returns shocks. The similar kinds of results are recorded for the Japan and China volatility index. Particularly, the analysis also supports that India VIX holds seasonality, on the market opening VIX observed to be at its high level, and on the subsequent days it remains low. The results on the options expiration unfold the facts that India VIX remains more normal on the day of expiration. Practical implications – The asymmetric relation and seasonal patterns are quite useful to the volatility traders to price the financial assets when market trades in the high- and low-volatility periods. Originality/value – There is a lack of studies of this kind in the context of emerging markets like India; hence, this is an attempt in this direction. The study provides an insight to the NSE to launch some derivative products (i.e. F & Os) on India VIX that can generate more liquidity in the market for the volatility traders.

scholarly journals The Forecasting Power of the Volatility Index: Evidence from the Indian Stock Market

2016 ◽  
Vol 4 (1) ◽  
Author(s):  
Surya Bahadur G. C. ◽  
Ranjana Kothari
Keyword(s):  
Stock Market ◽  
Implied Volatility ◽  
Market Volatility ◽  
Series Data ◽  
Future Price ◽  
Stock Market Volatility ◽  
Short Term ◽  
Volatility Index ◽  
India Vix ◽  
Indian Stock Market

<div><p><em>Stock market volatility is a measure of risk in investment and it plays a key role in securities pricing and risk management. </em><em>The paper empirically analyzes the relationship between India VIX and volatility in Indian stock market. </em><em>India VIX is a measure of implied volatility which reflects markets’ expectation of future short-term stock market volatility.</em><em> It is a volatility index based on the index option prices of Nifty. </em><em>The study is based on time series data comprising of daily closing values of CNX Nifty 50 index comprising of 1656 observations from March 2009 to December 2015. </em><em>The results of the study </em><em>reveal that India VIX has predictive power for future short-term stock market volatility. It has higher forecasting ability for upward stock market movements as compared to downward movements. Therefore, it is more a bullish indicator. Moreover, the accuracy of forecasts provided by India VIX is higher for low magnitude future price changes relative to higher stock price movements. The current value of India VIX is found to be affected by past period volatility up to one month and it has forecasting ability for next one-month’s volatility which means the volatility in the Indian stock markets can be forecasted for up to 60 days period. </em></p></div>

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