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Title: The New Zealand Implied Volatility Index
Author(s): Frijns, B.P.M. ; Tourani-Rad, A.; Zhang, Y.
Publication year: 2007
Publisher: Nijmegen : Economie
Number of Pages: 31 p.
Series: NiCE Working paper ; 1
DOI: http://dx.doi.org/10.1080/00779950809544415
Publication type: External research report

Please use this identifier to cite or link to this item : http://hdl.handle.net/2066/36566   http://hdl.handle.net/2066/36566

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Subject: Nijmegen Centre for Economics
Relationship Management
Organization: Financiële economie en ondernemingsfinanciering
Molecular and Laser Physics
Abstract:
This paper constructs an implied volatility index, the NZVIX, for the New Zealand stock market. Because there are no equity index options in New Zealand, we propose a new approach that uses stock options to construct an implied volatility index. Specifically, we use implied volatilities from four stock options to construct an implied volatility index for the NZX 15 Index. We find that the NZVIX has predictive power for future NZX 15 volatility and observe a significant negative relationship between NZVIX changes and NZX15 returns. Finally, we find a weak significant relation between lagged NZVIX changes and NZX 15 returns.

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