Option Implied Information

There is rich information in option price,including risk neutral moments and risk neutral distribution These various implied information can be extracted from these risk neutral information,and applied for different use.However,the research on the implicit information of existing options lacks internal consistency,and sometimes there are still some problems that are difficult to compare.Besides,due to the different characteristics of the Chinese market(such as dividend protection,few option contracts,short selling restrictions,high transaction costs,etc.),relevant methods and conclusions cannot be directly applied to the Chinese market.Therefore,under the general assumption of stochastic interest rate,stochastic volatility and stochastic jump,we extract and compare the option implied information indexes systmematically.According to the characteristics of Chinese market,Special adjustments are also made to the extraction of implied information indexes.On this basis,we conduct empirical research and interpret the rich information contained in the SSE 50ETF option price by different levels of theoretical information content.In theory,the option implied information content can be divided into three levels.Firstly,under the assumption of rational expectation,the option implied moments should contain the information of future realized moments,and the expectation of fluctuation and tail risk of the underlying.Secondly,the difference between the option implied moments and the future realized moments is the implied risk premium.It reflects the required risk compensation when investors undertake corresponding risk.Thirdly,when investor expectation is irrational,in addition to the rational expectation of the realized moment and the risk premium,the option implied moments should also contain investor sentiment.Based on this theory,we use the SSE 50ETF option market data to conduct empirical research,and the empirical results show that:(1)Both implied volatility(QVOL and CVOL)have significant predictive power for futurc realized volatility,and implied skewness(CSKEW and GSKEW)also have some predictive power for future realized skewness.However,in the plunge sample,the implied moment has a significant reduction in the prediction of the future realized moment.Investors may have irrational expectations for the future market due to market sentiment.(2)Implied moment indicators have a certain predictive effect on future tail events,but when the tail risk is subdivided,we further discover the expectation reflected by the implied moments does not accurately predict the probability of a specific future tail event.This inaccurate expectation may be influenced by the irrationality of investors.(3)In China's market,volatility risk is not a significant systemic risk in general.In theory,it means that option buyers will not require risk premium as compensation for risk;and skewness risk is generally a significant negative systemic risk,which means that the option skewness portfolios buyers will bear systemic risk and will therefore require negative skewness risk premium correspondingly.However,the volatility risk premium implied by the SSE50ETF option is significantly negative,while the skewness risk premium is significantly positive.This means that option implied moment risk premium in China's market is more of an emotional factor.This also shows that the implied moments of the SSE 50ETF option contain irrational expectations.We further test the relationship between option implied moment and investor sentiment,and find that the implied moments of SSE 50ETF options do contain investor sentiment information.We extract the irrational expectation information from the SSE 50ETF option and construct the option implied sentiment index by the extended Kalman filter method.Further empirical evidence shows that the option implied sentiment index has a reverse prediction effect on the future excess return of 50ETF,and the predictive power is better than the traditional market sentiment index extracted from the stock spot market.The lag term,the daily return of the spot,the liquidity of the spot market,the heterogeneous belief of the investor and the market financing interest rate have a significant impact on the option implied investor sentiment.