The Effect of Bid-Ask Prices on Brazilian Options Implied Volatility: A Case Study of Telemar Call Options

Although not explicitly reported, option traders on the Bovespa exchange pay an implicit bid-ask spread on each trade. Reported transaction prices that comprise the databases previously used to study the Brazilian options markets do not reflect actual option values at the time of the trades, but actual values plus (for purchases) or minus (for sales) the bid-ask spread. We use a chooser American option model to estimate Telemar call options bid-ask spreads, and to create a database of spread-adjusted trade prices. We find that the bid-ask spreads explain several previously reported puzzles regarding asset price volatility.

Desempenho Acadêmico e a Teoria do Prospecto: Estudo Empírico sobre o Comportamento Decisório

This study aims to identify the existence of a statistical relationship between rational choice and academic performance of undergraduate university students, based on Grinblatt, Keloharju and Linnainmaa (2011). With the use of questionnaires to collect data and logit regressions, the results show that Academic Performance (AP) has a direct relationship with the rationality of choices and alters cognitive biases in decision making. In this sense, students with higher AP made more rational choices than students with lower AP, which means a lower susceptibility to cognitive biases

Carteiras de Opções: Avaliação de Metodologias de Exigência de Capital no Mercado Brasileiro

The importance of risk management has been highlighted by the series of disasters related to the application of derivatives and by the common sense in needing to cover these operations with capital allocation. However, not much agreement exists concerning the methods for calculating the capital required for covering the potential losses of these assets. Options are derivatives that are still more complex, mainly if they are fitted into a portfolio, because they have many risk factors and they have a non-linear dependence on the underlying asset. The objective of this article is to analyze methods for calculating capital requirement of stock option portfolios in the Brazilian market. Seven methodologies are evaluated, according to the rules indicated by the Basle Committee, one standardized method and the others based on value at risk.

Simulação Histórica Filtrada: Incorporação da Volatilidade ao Modelo Histórico de Cálculo de Risco para Ativos Não-Lineares

Historical models are being quite used in the value at risk (VaR) estimation due to the fact that many returns of financial assets cannot be described by a theoretical distribution. In these models, each observation of the past can be a possible scenery and for each scenery there is a price for the asset, what represents an implicit assumption that the returns are identically and independently distributed. The violation of this assumption is the main criticism to these models, evidenced by the existence of volatility clusters in the financial series that can cause an inconsistency in the value at risk estimates. This work applies a solution for this problem incorporating the volatility to the historical model for the value at risk estimate of stock options in the Brazilian market. The obtained results show that, during the studied period, the methodology presents good performance for a VaR estimation of 99% probability. For the 98% and 95% probabilities, an overestimation of the VaR is verified.

Inclusão do Decaimento Temporal na Metodologia Delta-Gama para o Cálculo do VaR de Carteiras Compradas em Opções no Brasil

The Value at Risk calculation for options has a lot of difficulties. The non-normality and the non-linearity of these assets cause sufficient unaccuracy in this measurement, mainly for the parametric models. The purpose of this article is to analyze the results of the VaR estimate for a portfolio of long options with two models: the Delta-Gama approach and the Delta-Gama-Theta approach, which considers the deterministic effect of the time decay when estimating the VaR. These methodologies are compared according to the moneyness and the maturity of the options and they are tested by the Christoffersen test and the Lopez test. The results show that the Delta-Gama-Theta methodology produces better results in the proportion-of-failures test for the VaR of 95%. Both methodologies produce large errors for the out-of-the-money options and for the options with short maturity.

Adequação das Medidas de Valor em Risco na Formulação da Exigência de Capital para Estratégias de Opções no Mercado Brasileiro

Options strategies are combinations of transactions involving options on the same underlying asset or simultaneous positions on those derivatives assets and the underlying asset. Such transactions create new investment opportunities and different risk exposures, leading to specific capital requirements for financial institutions. However, there is a little agreement as to the methods for computing the capital requirements to cover strategic risks, so that, at the same time, speculative positions can be covered and risk-reducing transactions are not penalized. This article discusses various methods for the computation of capital requirements for stock option strategies in the Brazilian market. Six methods are analyzed according to the rules prescribed by the Basel Committee. One of the methods is standard, and the other five are based on Value at Risk concept.

Expectativas Inflacionárias e Inflação Implícita no Mercado Brasileiro

The trade volume of inflation indexed bonds has grown substantially in the treasury debt market. These bonds have been used as an important instrument for both diversifying investor´s portfolio, for managing firms´ liabilities and, mainly, for extracting inflation expectations by policymakers. This paper adds to the literature in twofold. First, we apply methodologies to obtain inflation expectations. Thus, we modified the method used in Durham (2007) to estimate the inflation risk premium. Second, we apply these methods in the Brazilian debt market for inflation indexed bonds issued from 2006 to 2008. Our results show that these methods perform better about inflation expectations, providing a more robust support for policymakers´ decisions.

A influência da assimetria de informação no retorno e na volatilidade das carteiras de ações de valor e de crescimento

This article investigates whether the information asymmetry component imbedded in the bid-ask spread helps explain the difference in returns between portfolios composed of value versus growth stocks in the Brazilian market. Additionally, we test whether the portfolios’ volatility has any relation with asymmetry. In this way, we incorporate an element from the market microstructure literature, the information asymmetry component, in the classic asset pricing theory. The results obtained for the period between July 2006 and April 2009 suggest that asymmetry can explain the difference in returns of the two types of portfolios. O presente trabalho tem como objetivo verificar se o componente de assimetria de informação embutido no spread de compra e venda ajuda a explicar a diferença de retornos entre carteirascompostas por ações de valor e de crescimento. Adicionalmente, testamos se a volatilidade das carteiras guarda alguma relação com a assimetria. Desta forma, incorporamos um elemento da literatura de microestrutura de mercado, o componente de assimetria de informação, à teoria clássica de apreçamento de ativos. O resultado obtido no período compreendido entre julho de 2006 e abril de 2009 sugere que a assimetria pode explicar a diferença entre os retornos das carteiras de valor e de crescimento.&nbsp

Expectativas inflacionárias e inflação implícita: será que pesquisas de mercado fornecem medidas precisas?

In recent years bonds indexed to inflation rates have experienced a tremendous growth in trading volumes. These securities have become an important tool for the diversification of investors' portfolios, to liability management and especially to gauge the expectations of monetary authorities. In this environment, this study contributes as it presents an amended methodology to estimate the inflation risk premium and in applying different methodologies in the Brazilian market. The results indicate that implicit inflation measures with or without adjustment of the inflation risk premium return the smallest forecast errors in relation to the IPCA of measurement period.Nos últimos anos os títulos indexados em índices inflacionários têm experimentado um grande crescimento nos volumes negociados. Estes títulos tornaram-se um importante instrumento para a diversificação das carteiras dos investidores, para administração de passivos e principalmente para aferição de expectativas de autoridades monetárias. Neste ambiente, este trabalho contribui ao apresentar uma metodologia modificada de estimação do prêmio de risco de inflação e por aplicar diferentes metodologias no mercado brasileiro. Os resultados indicam que as medidas de inflação implícita com ou sem ajuste do prêmio de risco de inflação retornam os menores erros de previsão em relação ao IPCA ocorrido