RT Report
T1 A Simple Expected Volatility (SEV) Index: Application to SET50 Index Options
A1 Wiphatthanananthakul, Chatayan
A1 McAleer, Michael
AB In 2003, the Chicago Board Options Exchange (CBOE) made two key enhancements to the volatility index (VIX) methodology based on S&P options. The new VIX methodology seems to be based on a complicated formula to calculate expectedvolatility. In this paper, with the use of Thailand’s SET50 Index Options data, we modify the apparently complicated VIX formula to a simple relationship, which has a higher negative correlation between the VIX for Thailand (TVIX) and SET50 Index Options. We show that TVIX provides more accurate forecasts of option prices than the simple expected volatility (SEV) index, but the SEV index outperforms TVIX in forecasting expected volatility. Therefore, the SEV index would seem to be a superior tool as a hedging diversification tool because of the high negative correlation with the volatility index.
YR 2009
FD 2009-03-24
LK https://hdl.handle.net/20.500.14352/49263
UL https://hdl.handle.net/20.500.14352/49263
LA eng
NO This paper was written while the first author was visiting the Econometric Institute, Erasmus School of Economics, Erasmus University Rotterdam, in autumn 2008.The first author wishes to acknowledge the financial support of the Stock Exchange of Thailand, while the second author wishes to thank the Australian Research Councilfor financial support, and the Erasmus School of Economics for their gracious hospitality and excellent working environment.
NO Australian Research Council
DS Docta Complutense
RD 10 abr 2025