Arbitrage-free implied volatility surfaces for options on single stock futures

The current method employed by the Johannesburg Stock Exchange11www.jse.co.za. (JSE) to determine implied volatility is based on trade data and a linear deterministic approach. The aim of this paper is to construct a market-related arbitrage-free implied volatility surface, by using a quadratic dete...

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Veröffentlicht in:	The North American journal of economics and finance 2013-12, Vol.26, p.380-399
Hauptverfasser:	Kotzé, Antonie, Labuschagne, Coenraad C.A., Nair, Merell L., Padayachi, Nadine
Format:	Artikel
Sprache:	eng
Schlagworte:	Arbitrage Futures market Options on single stock futures Quadratic deterministic function Stock exchanges Studies Volatility Volatility surface
Online-Zugang:	Volltext
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Beschreibung
Zusammenfassung:	The current method employed by the Johannesburg Stock Exchange11www.jse.co.za. (JSE) to determine implied volatility is based on trade data and a linear deterministic approach. The aim of this paper is to construct a market-related arbitrage-free implied volatility surface, by using a quadratic deterministic function, for two stock indices and ten single stock futures (SSFs). Actual traded data is used and we show practically how all no-arbitrage conditions are implemented and tested.
ISSN:	1062-9408 1879-0860
DOI:	10.1016/j.najef.2013.02.012