Use this URL to cite or link to this record in EThOS: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.635790
Title: The efficiency, information content and intraday behaviour of UK index option prices
Author: Ap Gwilym, O. M.
Awarding Body: University College of Swansea
Current Institution: Swansea University
Date of Award: 1995
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Abstract:
There is only sparse published evidence on the behaviour of the prices of traded financial options in the UK. This thesis addresses this void in the literature by investigating several aspects of index options pricing on the London market. The efficiency of the market is tested directly by means of an event study based on the 1992 UK general election, and indirectly by examining the predictive power of the implied volatility from options. The option market appears less efficient than the stock market in its response to the public information from opinion polls, but does appear to have become more efficient since the previous election. Implied volatility is found to be inferior to historical volatility as a forecast of realised volatility over the remaining life of the option. Several other properties of implied volatility are also discussed, including the smile, the term structure and behaviour around expiry days. Forward/forward volatility is also examined as a measure of the market's expectation of future volatility. The behaviour of the underlying asset around option expiry days is also examined. The final two parts of this study offer a particular contribution by examining patterns in bid-ask spreads, returns and volatility on an intraday basis. The intraday patterns in bid-ask spreads differ slightly from the evidence from stock markets, and market structure is identified as a possible reason. The time of day return patterns reported for stock markets and US options markets are generally not replicated for the UK options market. However, a U-shaped intraday pattern in volatility is consistent with previous work.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID: uk.bl.ethos.635790  DOI: Not available
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