Study On Correlation Between Individual Stock Option And The Underlying Asset Price

The first stock options appeared in the United States in 1970 s which has become most dynamic in the derivatives market. Emerging markets have also launched stock options. As an important derivative of systemic risk management, the stock options play a more and more important role in capital market. The capital market development of china is relatively lagging behind until February 9, 2015, when the Shanghai 50 ETF options had been launched. This shows that Chinese capital market has entered a higher stage of development.This article makes a research based on the data of the Shanghai automobile options and its underlying stocks, shanghai 180 ETF options and its underlying stocks. Shanghai auto stock represents a share of the stock market. But Shanghai 180 ETF share of stocks includes medium and small blue ships, which covers industries widely, and has strong representative for the market. This article attempts to generate a conclusion of the stock option and the underlying asset price’s correlation based on the comparision between the individual and the general situation. After empirical analysis, we find that shanghai auto options and shanghai 180 ETF options have a relatively consistent results.The co-integration relationship proves that shanghai auto stocks and the underlying stocks have a long-term equilibrium relationship,at the same time,the shanghai 180 ETF and underlying asset also have a long-term equilibrium relationship;Granger causality shows that shanghai auto stock option is the cause of the underlying stock price and the shanghai 180 ETF stake is also the cause of the underlying asset; The impulse response results show that shanghai auto stocks option has a larger impact to the underlying stock,but only a small response to the impact of the stock option.The shanghai 180 ETF options has a small reaction to the impact of the underlying asset,but the underlying asset has no reaction to the impact of the shanghai 180 ETF options. According to the empirical results, this article draws a general conclusion about correlation relationship between stock options and the underlying asset,that stock optionsand the underlying asset have a long-termequilibriumrelationship; This article concludes that stock options has a strong reaction in respond to the impact of the underlying asset,but the underlying assets are not sensitive enough reaction in respond to the impact of the stock options.