This paper, which follows up the analyses of an earlier study published in December 1988, starts by updating the description of the regulatory framework for Italian stock options (premium contracts), with reference both to the regulations issued by the Consob (the Italian SEC) and the changes in tax law. This is followed by figures on the size of the market and its development in recent years. After describing the standards operators use to value premium contracts and quantifying the deviations from the theoretical values, we examine the techniques for forecasting share price volatilities and verify the information content of the implied volatilities of premium contracts. The last part of the paper describes an extensive simulation designed to reveal arbitrage opportunities that operators failed to exploit during the period in question, with account being taken of transaction costs.

Implied Volatilities and Arbitrage Opportunities in the Italian Options Market / Barone, Emilio; Cuoco, D.. - (2004). [10.2139/ssrn.512507]

Implied Volatilities and Arbitrage Opportunities in the Italian Options Market

BARONE, EMILIO;
2004

Abstract

This paper, which follows up the analyses of an earlier study published in December 1988, starts by updating the description of the regulatory framework for Italian stock options (premium contracts), with reference both to the regulations issued by the Consob (the Italian SEC) and the changes in tax law. This is followed by figures on the size of the market and its development in recent years. After describing the standards operators use to value premium contracts and quantifying the deviations from the theoretical values, we examine the techniques for forecasting share price volatilities and verify the information content of the implied volatilities of premium contracts. The last part of the paper describes an extensive simulation designed to reveal arbitrage opportunities that operators failed to exploit during the period in question, with account being taken of transaction costs.
Implied Volatilities and Arbitrage Opportunities in the Italian Options Market / Barone, Emilio; Cuoco, D.. - (2004). [10.2139/ssrn.512507]
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11385/168284
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