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.

O modelo de projeção de volatilidade de riskmetrics e a hipótese de distribuição normal condicional para alguns fatores de risco do Brasil

UnavailableIndisponíve

Measuring risk based on stable distributions: an examination of Latin American stock indexes

Accurate forecasting of risk is the key to sucessful risk management techniques. Given the fat-tailed characterisitic of financial returns, the assumptions of modeling these returns with the thin-tailed Gaussian distribution is inappropriate. In this paper a more accurate VaR estimate is tested using the “stable” or “α- stable” distribution, which allows for varying degrees of tail heaviness and varying degrees of skewness. Stable VaR measures are estimated and forecasted using the main Latin American stock market indexes. The results show that the stable modeling provides conservative 99% VaR estimates, while the normal VaR modeling significantly underestimates 99% VaR. The 95% VaR stable and normal estimates, using a window length of 50 observations, are satisfactory. However, increasing the window length to 125 and 250 observations worsens the stable and the normal VaR measurements.Indisponível

O Uso de Dados de Alta Freqüência na Estimação da Volatilidade e do Valor em Risco para o Ibovespa

This paper investigates the use of high frequency data in the estimation of daily and intradaily volatility, in order to compute value at risk (VaR) forecasts for the IBOVESPA. GARCH models and deterministic methods for the filtering of seasonal patterns have been used in the computation of intraday volatility and VaR forecasts. For daily VaR two simple methods seek to extract the volatility information conveyed by the high frequency data. The first method is based on the sample standard deviation with a moving window, while the second is based on exponencially wheighted moving average. Both methods tested presented good performance. For intraday VaR the results indicate that the filtering of the seasonal pattern is a fundamental step in obtaining useful forecasts of volatility and VaR.

Comparação das metodologias de mapeamento sugeridas pelo riskmetrics TM para cálculo de risco de mercado de títulos pré-fixados no Brasil

Unavailable.Diversas instituições brasileiras adotam para cálculo e acompanhamento de risco de mercado a metodologia RiskMetricsTM. Recentemente, o RiskMetrics Group sugeriu um aperfeiçoamento no processo de mapeamento dos fluxos de caixa. Esse trabalho analisa as diferenças entre as duas metodologias, e compara seus resultados, para os últimos dois anos, no mercado brasileiro das taxas de juro e de cupons cambiais. Apesar das diferenças conceituais existentes entre os procedimentos, os resultados dos cálculos dos percentuais de alocação aos vértices, dos cálculos dos valores em risco e dos testes de acurácia foram semelhantes

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.

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.

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.

Árvores binominais implícitas: aplicação para as opções de Telebrás no exercício de abril de 1999

Unavailable.Este trabalho utiliza o método de árvores binomiais implícitas proposto por Rubinstein (1994), comparando-o com o modelo de Black-Scholes (1973) na construção e manutenção de um portfólio de hedge. O método de árvores binomiais implícitas tenta encontrar uma única árvore binomial que descreva o comportamento do ativo-objeto, de forma que todos os prêmios de opções calculados a partir desta árvore estejam em consonância com os valores observados no mercado para todos os diferentes preços de exercício. Obtêm-se os parâmetros utilizados para hedge da árvore binomial implícita calculada e constroem-se os portfólios, comparando a sua eficácia de hedge com os portfólios que utilizam os parâmetros fornecidos pelo modelo de Black-Scholes. A amostra utilizada constituiu-se dos prêmios de opções dos recibos de Telebrás no período de 2 de março a 16 de abril de 1999. Os resultados indicam que não foram encontradas diferenças estatisticamente significativas entre os portfólios construídos e ajustados pelo modelo aqui apresentado com os portfólios que empregaram os parâmetros de hedge dados pelo modelo de Black-Scholes