Research On The Impact Of Stock Index Option On Volatility Of Underlying Stock Price Index

In recent years, global financial derivatives have developed rapidly. After the launchof CSI300index futures in China Financial Futures Exchange(CFFE) on April16,2010,in2012April, CFFE began mock trading of CSI300stock index option and began tospread to the pilot futures company members gradually in August. CSI300stock indexoption is almost certain. And the impacts of CSI300stock index option on the quality ofCSI300stock index areof great significance.This paper chooses the South Korea which has the similar capital market maturityand similar contract design of stock index option as the research object of the study tostudy the impacts of KOSPI200index option on the volatility of the KOSPI200indexboth on theory study and empirical study.In the empirical analysis of the impacts of KOSPI200index option on the volatilityof KOSPI200index market, the impacts of KOSPI200index option on the volatility andthe information asymmetry of the volatility are analyzed by GARCH model with onedummy variable and EGARCH model with two dummy variables respectively, and theunder conclusions are drawn, first,KOSPI200index option increases the volatilityofKOSPI200index market, second, KOSPI200index option enhances both the impactsoffavorable news and bad news on the volatility of KOSPI200index market, and theincrease of the impact of bad news on volatility is stronger than the increase of theimpact of favorable news on volatility, that is to say, KOSPI200index option increasesthe information asymmetry of the volatility ofKOSPI200index market.This paper analyzes the causes of impacts ofKOSPI200index option on thevolatility of the KOSPI200index market.First, KOSPI200index option increases thepositive feedback tradingof KOSPI200index,second,KOSPI200index option increasesthe trading volume of KOSPI200index, third,KOSPI200index option changes theinvestor-structure of KOSPI200index. As well, this paper offers policy suggestions onCSI300index option into two aspects, one of which is to attach importance to the riskcontrol and supervision of the CSI300such as designing margin settlement systemconforms to China’s national conditions and supervising the stock index option andmonitoring market manipulation behavior in time, the other is to optimize the investor structure of the market, such as introducing foreign investors, fostering domesticinstitutional investors and strengthening the education of individual investors.This paper is divided into four parts. The first part is the introductionwhichintroduces the background of the thesis topic, reviews the relevant theoretical andempirical research, descripts the content and the structure arrangement of the study andsketches out the innovative points in this paper.The second part is the theory analysis oftheimpacts ofKOSPI200index option on the volatility of KOSPI200index market, firstintroduces the definition of volatility and the impacts of stock option on capital market,then analyzes theoreticallythe transmission mechanism why the stock index optionincrease and decrease the volatility of underlying stock price index market respectively.The third part is the empirical analysis of the impacts of KOSPI200index option on thevolatility of KOSPI200index market, firstly, this part introduces models and methodsinvolved in the empirical analysis in this part, then empirically analyzes the impacts ofKOSPI200index option on the volatility of KOSPI200index market using GARCHmodel with one dummy variable and empirically analyzed the impacts of KOSPI200index option on the information asymmetry of the volatility usingEGARCH model withtwo dummy variables. The fourth part is the conclusions and suggestions to our countryto CSI300index option, reference the experience of KOSPI200index option, this paperputs forward suggestions like the risk prevention, control and supervision.