Index Futures and the Implied Volatility of Options
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Type of Work10 pages
Citation of Original PublicationMorse, Joel N. "Index Futures and the Implied Volatility of Options," Review of Futures Markets, Vol. 7, No. 2, 1988, pp. 325-333
This paper examines the relation between the pricing of stock index futures contracts and the implied volatilities of index and individual equity options. For data from the 1986-1988 period, the difference between the implied volatility of calls and puts on the Standard and Poor's 100 index appears to be closely related to variation in the premium or discourse of the major U.S.-traded futures contracts. We construct an argument to support this observation. Reasons are also offered for the finding that index put volatilities exceed those for calls during the entire sample period.