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2004 Fiscal Year Final Research Report Summary

Transaction Cost Savings with Stock Index Options and Liquidities provided by Securities Dealers

Research Project

Project/Area Number 15530212
Research Category

Grant-in-Aid for Scientific Research (C)

Allocation TypeSingle-year Grants
Section一般
Research Field Public finance/Monetary economics
Research InstitutionWaseda University

Principal Investigator

TANIGAWA Yasuhiko  Waseda University, Faculty of Commerce, Associate Professor, 商学学術院・商学部, 助教授 (60163622)

Project Period (FY) 2003 – 2004
KeywordsTick-by-Tick data / Volatility Smile / Market Makers / Nikkei 225 Options / Implied Volatility / Liquidity
Research Abstract

In analyzing option prices, it is very important to use data with exactly the same time-stamps. Daily data, of closing prices with unknown time when the closing transactions were done, don't guarantee such simultaneousness. This research utilizes tick-by-tick data for Nikkei 225 put and call options from January 2000 to December 2000. They are records of price, volume, bid, ask, and time of each transactions, that make us to keep the simultaneousness. We investigate volatility smile, which is a nonlinear relationship between moneyness (= a ratio of an exercise price to a price of the underlying asset of the option) and the implied volatility (IV), those documented in previous studies using daily data.
We found that (1)IV's from daily data don't necessarily coincide with ones from tick data, (2)IV's are affected whether the transaction occurred at the ask side or the bid side, (3)After adjusting these, we still observe volatility smile, and (4)a large IV which is far off from the fitted smile curve occurs with deep-in-the-money options of a small volume, whose price sensitivity to the volatility of the underlying securities is small.
These findings are consistent with the following theoretical predictions ; (a)effects of a change in the volatility on the option price are greatest for near-the-money (NTM) options, and trading volumes are highest for NTM options, (b)NTM options need relatively large adjustments when the volatility changes, and therefore prices for NTM options should be compensated for transactions costs that the NTM options would incur, (c)option trading is motivated by differences of opinions among traders, on the value of volatilities, which can not be observed directly but must be inferred from option prices.

  • Research Products

    (6 results)

All 2005 2004

All Journal Article (6 results)

  • [Journal Article] ボラティリティ・スマイルとスプレッド2005

    • Author(s)
      谷川 寧彦
    • Journal Title

      早稲田商学 406

      Pages: 435-461

    • Description
      「研究成果報告書概要(和文)」より
  • [Journal Article] Tick Data Analysis of Volatility Smile in NK225 Options (in Japanese)2005

    • Author(s)
      Yasuhiko TANIGAWA
    • Journal Title

      Waseda Commercial Review Vol.406

      Pages: 435-461

    • Description
      「研究成果報告書概要(欧文)」より
  • [Journal Article] ランチタイムの取引所外取引について2004

    • Author(s)
      谷川 寧彦
    • Journal Title

      ファイナンシャルレビュー 70

      Pages: 29-49

    • Description
      「研究成果報告書概要(和文)」より
  • [Journal Article] 再建中企業の証券流通市場の整備に関する研究2004

    • Author(s)
      谷川 寧彦
    • Journal Title

      大銀協フォーラム研究助成論文 8

      Pages: 1-28

    • Description
      「研究成果報告書概要(和文)」より
  • [Journal Article] Off-Exchange Stock Trading during Lunchtime Breaks of the Tokyo Stock Exchange (in Japanese with English Abstract)2004

    • Author(s)
      Yasuhiko TANIGAWA
    • Journal Title

      Financial Review Vol.70

      Pages: 29-49

    • Description
      「研究成果報告書概要(欧文)」より
  • [Journal Article] Organizing a Secondary Market for Securities of Companies under Restructuring (in Japanese)2004

    • Author(s)
      Yasuhiko TANIGAWA
    • Journal Title

      Dai-Ginkyo Forum Vol.8

      Pages: 1-28

    • Description
      「研究成果報告書概要(欧文)」より

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Published: 2007-12-13  

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