Options listing and the volatility of the underling asset: a study on the derivative market function

Chesney, Marc; Eid Júnior, William

doi:10.1590/S0034-75901996000100005

Abstracts

There are basic misunderstandings on derivative markets. Some professionals believe that they are a kind of casinos and have no utility for the investors. This work looks at the effects of options introduction in the Brazilian market, seeking for another benefit for this introduction: changes in the stocks risk leveI. Our results are the same found in the US and other markets: the options introduction reduces the stocks volatility. We also found that there is a slight indication that the volatility becames more stochastic with this alternative.

option introduction; volatility; GARCH

Os mercados de derivativos são vistos com muita desconfiança por inúmeras pessoas. Este trabalho analisa o efeito da introdução de opções sobre ações no mercado brasileiro buscando identificar uma outra justificativa para a existência destes mercados: a alteração no nível de risco dos ativos objetos destas opções. A evidência empírica encontrada neste mercado está de acordo com os resultados obtidos em outros mercados - a introdução de opções é benéfica para o investidor posto que reduz a volatilidade do ativo objeto. Existe também uma tênue indicação de que a volatilidade se torna mais estocástica com a introdução das opções.

introdução de opções; volatilidade; GARCH

ADMINISTRAÇÃO CONTÁBIL E FINANCEIRA

Options listing and the volatility of the underling asset: a study on the derivative market function

Marc Chesney^I; William Eid Júnior^II

^IEconomy and Finance Department Professor and Associate Dean of the Doctorate Program at HEC (Hautes Études Commerciales Jouy en Josas), France. E-mail chesney@gwsmtp.hec.fr

^IIAccounting, Finance and Control Department Professor at EAESP/FGV. E-mail weid@eaesp.fgvsp.br

RESUMO

Os mercados de derivativos são vistos com muita desconfiança por inúmeras pessoas. Este trabalho analisa o efeito da introdução de opções sobre ações no mercado brasileiro buscando identificar uma outra justificativa para a existência destes mercados: a alteração no nível de risco dos ativos objetos destas opções. A evidência empírica encontrada neste mercado está de acordo com os resultados obtidos em outros mercados - a introdução de opções é benéfica para o investidor posto que reduz a volatilidade do ativo objeto. Existe também uma tênue indicação de que a volatilidade se torna mais estocástica com a introdução das opções.

Palavras-chave: introdução de opções, volatilidade, GARCH.

ABSTRACT

There are basic misunderstandings on derivative markets. Some professionals believe that they are a kind of casinos and have no utility for the investors. This work looks at the effects of options introduction in the Brazilian market, seeking for another benefit for this introduction: changes in the stocks risk leveI. Our results are the same found in the US and other markets: the options introduction reduces the stocks volatility. We also found that there is a slight indication that the volatility becames more stochastic with this alternative.

Key words: option introduction, volatility, GARCH.

Texto completo disponível apenas em PDF.

Full text available only in PDF format.

BIBLIOGRAFIA COMPLEMENTAR

ENDERS, S. Applied econometric time series. NY, USA: Wiley, 1995.

GIBSON, R. L'évaluation des options. França: Presse Universitarie de France, 1993.

PARKINSON, M. The extreme value method for estimating the variance of the rate of return, Journal of Business, Chicago, v. 53, n. 1, p. 61-5, 1980.

SHARPE, W. F., ALEXANDER, G. J., BAILEY, J. V. Investments. 5 ed. NY, USA: Prentice Hall, 1995.

Artigo recebido pela Redação da RAE em fevereiro/1996, avaliado e aprovado para publicação em abril/1996.

This research have been partially supported by the NPP - Núcleo de Pesquisas e Publicações da EAESP/FGV,Brazil.

1. Banco do Brasil (BB4), Eletrobrás (ELE3 e ELE6), Petrobrás (PET 4), Paranapanema (PMA4), Ieíebrás (TEL4).

2. Sudameris (BFI3), Banco Noroeste (BNE4), Real de Investimentos (BRI4), Cosigua (COG4), Frigobrás (FRI4), Banco Real (REA3), Siderúrgica Riograndense (RI04), Sadia Concórdia (SC04). Tupy (TUP4), Unibanco (UBB3).

3. Tables 1 and 2 show the results attained in the three volatility cases. The results for each case are presented in the time frames before and alter. A statistic t was applied to the two time frames referring to the equality test between the values and their varíatíon based on the previous trame. In table 2 the averages of these variations are also presented.

4. In the volatility analysis six months were included. When we analyse the variability of this parameter we lose one month due to the tact that this analysis was based on 21 days of negotiations.

5. LEE, S. B., OHK, K. Y. Stock index futures listing and structural change in time-varying volatility, Journal of Futures Markets, NY, USA, v. 12, n. 5, p. 493-509, 1992.

6. KLEMKOSKY, R. C., MANESS, T. S. The impact of options on the underlying securities, Journal of Portfolio Management, NY, USA, p. 12-18, Winter 1980.

7. CONRAD, J. The price effect of option introduction, Journal of Finance, NY, USA, XLIV, n. 2, p. 487-98, June 1989.

8. BRUAND, M., GIBSONASNER, R. Options, futures and stock market interactions: empirical evidence from the Swiss stock market. Manuscrito. Ecole des HEC. Suiça: Université de Lausanne, 1995.

9. DAMADORAN, A., SUBRAHMANYAM, M. The effects of derivatives securities on the markets for the underlying assets in me United States. Financial Markets. Institutions and Instruments. NY, USA: Willey, 1992.

10. BRUAND, M., GIBSONASNER, R. Options, futures and stock market interactions ... Op. cit.

ENDERS, S. Applied econometric time series. NY, USA: Wiley, 1995.
GIBSON, R. L'évaluation des options. França: Presse Universitarie de France, 1993.
PARKINSON, M. The extreme value method for estimating the variance of the rate of return, Journal of Business, Chicago, v. 53, n. 1, p. 61-5, 1980.
SHARPE, W. F., ALEXANDER, G. J., BAILEY, J. V. Investments. 5 ed. NY, USA: Prentice Hall, 1995.
5. LEE, S. B., OHK, K. Y. Stock index futures listing and structural change in time-varying volatility, Journal of Futures Markets, NY, USA, v. 12, n. 5, p. 493-509, 1992.
6. KLEMKOSKY, R. C., MANESS, T. S. The impact of options on the underlying securities, Journal of Portfolio Management, NY, USA, p. 12-18, Winter 1980.
7. CONRAD, J. The price effect of option introduction, Journal of Finance, NY, USA, XLIV, n. 2, p. 487-98, June 1989.
8. BRUAND, M., GIBSONASNER, R. Options, futures and stock market interactions: empirical evidence from the Swiss stock market. Manuscrito. Ecole des HEC. Suiça: Université de Lausanne, 1995.
9. DAMADORAN, A., SUBRAHMANYAM, M. The effects of derivatives securities on the markets for the underlying assets in me United States. Financial Markets. Institutions and Instruments. NY, USA: Willey, 1992.

Publication Dates

Publication in this collection
17 July 2012
Date of issue
Mar 1996

History

Received
Feb 1996
Accepted
Apr 1996

This work is licensed under a Creative Commons Attribution 4.0 International License.

[1] ENDERS, S. Applied econometric time series. NY, USA: Wiley, 1995.

[2] GIBSON, R. L'évaluation des options. França: Presse Universitarie de France, 1993.

[3] PARKINSON, M. The extreme value method for estimating the variance of the rate of return, Journal of Business, Chicago, v. 53, n. 1, p. 61-5, 1980.

[4] SHARPE, W. F., ALEXANDER, G. J., BAILEY, J. V. Investments. 5 ed. NY, USA: Prentice Hall, 1995.

[5] 5. LEE, S. B., OHK, K. Y. Stock index futures listing and structural change in time-varying volatility, Journal of Futures Markets, NY, USA, v. 12, n. 5, p. 493-509, 1992.

[6] 6. KLEMKOSKY, R. C., MANESS, T. S. The impact of options on the underlying securities, Journal of Portfolio Management, NY, USA, p. 12-18, Winter 1980.

[7] 7. CONRAD, J. The price effect of option introduction, Journal of Finance, NY, USA, XLIV, n. 2, p. 487-98, June 1989.

[8] 8. BRUAND, M., GIBSONASNER, R. Options, futures and stock market interactions: empirical evidence from the Swiss stock market. Manuscrito. Ecole des HEC. Suiça: Université de Lausanne, 1995.

[9] 9. DAMADORAN, A., SUBRAHMANYAM, M. The effects of derivatives securities on the markets for the underlying assets in me United States. Financial Markets. Institutions and Instruments. NY, USA: Willey, 1992.