Does Net Buying Pressure Affect the Shape of Implied Volatility Functions?

Journal of Finance

Volumn 59, Issue 2, 2004, Pages 711-753

  Bollen, Nicolas P B ^a   Whaley, Robert E ^b  

^a VANDERBILT UNIVERSITY   (United States)

^b DUKE UNIVERSITY   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 1842663101     PISSN: 00221082     EISSN: None     Source Type: Journal    
DOI: 10.1111/j.1540-6261.2004.00647.x     Document Type: Article

References (50)

1. Anderson, Torben, Luca Benzoni, and Jesper Lund, 2002, An empirical investigation of continuous-time equity return models, Journal of Finance 57, 1239-1284.
2. Bakshi, Gurdip, Charles Cao, and Zhiwu Chen, 1997, Empirical performance of alternative option pricing models, Journal of Finance 52, 2003-2049.
3. Bakshi, Gurdip, and Nikunj Kapadia, 2003, Delta-hedged gains and the negative market volatility risk premium, Review of Financial Studies 16, 527-566.
4. Bakshi, Gurdip, Nikunj Kapadia, and Dilip Madan, 2003, Stock return characteristics, skewness laws, and the differential pricing of individual equity options, Review of Financial Studies 16, 101-143.
5. Bates, David S., 2000, Post-'87 crash fears in the S&P 500 futures options market, Journal of Econometrics 94, 181-238.
6. Beneish, Messod D., and Robert E. Whaley, 1996, An anatomy of the "S&P Game": The effects of changing the rules, Journal of Finance 51, 1909-1930.
7. Black, Fischer, 1976, Studies of stock price volatility changes, in Proceedings of the 1976 Meetings of the Business and Economics Section, pp. 177-181 (American Statistical Association).
8. Black, Fischer, and Myron Scholes, 1973, The pricing of options and corporate liabilities, Journal of Political Economy 81, 637-659.
9. Bondarenko, Oleg, 2003, Why are put options so expensive?, Working paper, University of Illinois at Chicago.
10. Chernov, Mikhail, Ron Gallant, Eric Ghysels, and George Tauchen, 2003, Alternative models of stock price dynamics, Journal of Econometrics 116, 225-257.
11. Clark, Peter K., 1973, A subordinated stochastic process model with finite variance for speculative prices, Econometrica 41, 135-155.
12. Cox, John C., and Stephen A. Ross, 1976, The valuation of options for alternative stochastic processes, Journal of Financial Economics 3, 145-166.
13. David, Alexander, and Pietro Veronesi, 2000, Option prices with uncertain fundamentals: Theory and evidence on the dynamics of implied volatilities, Working paper, University of Chicago.
14. Dennis, Patrick, and Stewart Mayhew, 2002, Risk-neutral skewness: Evidence from stock options, Journal of Financial and Quantitative Analysis 37, 471-493.
15. Derman, Emanuel, and Iraj Kani, 1994, Riding on the smile, Risk 7, 32-39.
16. Duffee, Gregory R., 1995, Stock returns and volatility: A firm-level analysis, Journal of Financial Economics 37, 399-420.
17. Dumas, Bernard, Jeff Fleming, and Robert E. Whaley, 1998, Implied volatility functions: Empirical tests, Journal of Finance 53, 2059-2106.
18. Dupire, Bruno, 1994, Pricing with a smile, Risk 7, 18-20.
19. Emanuel, David C., and James D. MacBeth, 1982, Further results on the constant elasticity of variance call option pricing model, Journal of Financial and Quantitative Analysis 4, 533-554.
20. Engle, Robert F., and Chowdhury Mustafa, 1992, Implied ARCH models from options prices, Journal of Econometrics 52, 289-311.
21. Epps, Thomas W., and Mary L. Epps, 1976, The stochastic dependence of security price changes and transaction volumes: Implications for the mixture of distributions hypothesis, Econometrica 44, 302-321.
22. Eraker, Born, Michael Johannes, and Nicholas Polson, 2003, The impact of jumps in volatility and return, Journal of Finance 58, 1269-1300.
23. Figlewski, Stephen, 1989, Option arbitrage in imperfect markets, Journal of Finance 44, 1289-1311.
24. Fleming, Jeff, 1999, The economic significance of forecast bias of S&P 100 index option implied volatility, Advances in Futures and Option Research 10, 219-251.
25. Fleming, Jeff, Barbara Ostdiek, and Robert E. Whaley, 1995, Predicting stock market volatility: A new measure, Journal of Futures Markets 15, 265-302.
26. Green, T. Clifton, and Stephen Figlewski, 1999, Market risk and model risk for a financial institution writing options, Journal of Finance 54, 1465-1499.
27. Harris, Lawrence, and Eitan Gurel, 1986, Price and volume effects associated with changes in the S&P 500 list: New evidence for the existence of price pressures, Journal of Finance 41, 815-829.
28. Harvey, Campbell R., and Robert E. Whaley, 1992, Market volatility prediction and the efficiency of the S&P 100 index option market, Journal of Financial Economics 30, 43-73.
29. Holthausen, Robert, Richard Leftwich, and David Mayers, 1987, The effects of large block transactions on security prices, Journal of Financial Economics 19, 237-267.
30. Jackwerth, Jens C., 2000, Recovering risk aversion from option prices and realized returns, Review of Financial Studies 13, 433-451.
31. Johnson, Norman E., 1978, Modified t-tests and confidence intervals for asymmetrical populations, Journal of the American Statistical Association 73, 536-544.
32. Jorion, Phillippe, 1989, On jumps in the foreign exchange and stock market, Review of Financial Studies 4, 427-445.
33. Kraus, Alan, and Hans R. Stoll, 1972, Price impacts of block trading on the New York Stock Exchange, Journal of Finance 27, 469-588.
34. Liu, Jun, and Francis A. Longstaff, 2000, Losing money on arbitrages: Optimal dynamic portfolio choice in markets with arbitrage opportunities, Working paper, UCLA.
35. Lo, Andrew W., and Jiang Wang, 2000, Trading volume: Definitions, data analysis, and implications of portfolio theory, Review of Financial Studies 13, 257-300.
36. Longin, Francois, and Bruno Solnik, 2001, Extreme correlation of international equity markets, Journal of Finance 56, 649-676.
37. Longstaff, Francis A., 1995, Option pricing and the martingale restriction, Review of Financial Studies 8, 1091-1124.
38. Lowenstein, Roger C., 2000. When Genius Failed: The Rise and Fall of Long-Term Capital Management (Random House, Inc., New York).
39. Nelson, Daniel B., 1991, Conditional heteroskedasticity in asset returns: A new approach, Econometrica 59, 347-370.
40. Pan, Jun, 2002, The jump-risk premia implicit in option prices: Evidence from an integrated time-series study, Journal of Financial Economics 63, 3-50.
41. Rosenberg, Joshua V., and Robert F. Engle, 2002, Empirical pricing kernels, Journal of Financial Economics 64, 341-372.
42. Rubinstein, Mark, 1994, Implied binomial trees, Journal of Finance 49, 771-818.
43. Scholes, Myron, 1972, The market for securities: Substitution versus price pressure and the effects of information on share price, Journal of Business 45, 179-211.
44. Shleifer, Andrei, 1986, Do demand curves for stocks slope down? Journal of Finance 41, 579-590.
45. Shleifer, Andrei, and Robert Vishny, 1997, The limits of arbitrage, Journal of Finance 52, 35-55.
46. Smith, Tom, and Robert E. Whaley, 1994, Estimating the effective bid/ask spread using time and sales data, Journal of Futures Markets 14, 437-455.
47. Stoll, Hans R., 1969, The relationship between put and call prices, Journal of Finance 24, 802-824.
48. Tauchen, George E., and Mark Pitts, 1983, The price variability-volume relationship on speculative markets, Econometrica 51, 485-505.
49. Whaley, Robert E., 1986, Valuation of American futures options: Theory and empirical tests, Journal of Finance 41, 127-150.
50. Whaley, Robert E., 1993, Derivatives on market volatility: Hedging tools long overdue, Journal of Derivatives 1, 71-84.