Research On Applicability Of The Implied Volatility Of Shanghai Securities 50ETF Option In VaR Measurement

In February 9,2015,the Shanghai stock exchange officially launched the first Chinese venue options products — Shanghai 50 ETF options,which has opened a prelude to the development of China's option market.Option is an important financial derivative,which has the function of risk management,price discovery and asset allocation.More importantly,the launch of 50 ETF option provides a very important parameter—the implied volatility.The implied volatility is very important to the risk measurement and management of the underlying asset 50 ETF.The principle of Va R parametric computing is simple and easy to operate,but the most important parameter—volotility is unknown.So we need to forecast the volatility.The accuracy of the forecasted volatility has a direct impact on the accuracy of Va R measurement.Scholars have developed a variety of models to predict volatility,using different methods,and reaching different conclusions.The coexistence of different models also illustrates that different types of models have different defects.There are two major kinds of methods to forecast volatility,one is based on historical information,such as historical volatility and GARCH volatility,and the other one is the implied volatility.Theoretically,the ability of implied volatility to predict future volatility should be the strongest.Options have long-term properties,while the current options trading price,including future financial and economic information,can exactly reflects people's estimations and judgments of the future market.Therefore,the implied volatility extracted from the option price should be the most accurate,and should have the best performance in the Va R measurement.However,since 50 ETF did not have corresponding option products before,the research on the applicability of implied volatility in Va R measurement has not been completed.This article will extract the implied volatility of the next 30 days from the option price,and then explore the applicability of implied volatility in Va R measurement according to the volatility accuracy regression test and the Va R failure test.In addition,this paper also makes a simple analysis of the prediction accuracy of the implied volatility of the forecast period of 1 week and 2 weeks,to provides a reference for the future study of the applicability of the implied volatility in the Va R measurement.This paper's conclusions are as follows:(1)In 30 days forecast period,at the 90%confidence level,the model free implied volatility is the most suitable in Va R measurement.At the 95% confidence level,the BS implied volatility is the best forecast volatility,while the model free implied volatility has over-estimated market risk;At the 99% confidence level,all kinds of volatilities are invalid in the Va R measurement,but the implied volatility is relatively better;(2)In 1 week forecast period,the implied volatility has the maximum prediction error,so its prediction accuracy is not ideal at all.But in a longer forecast period(2 weeks),the prediction accuracy of the implied volatility significantly improves,and performs better than the historical volatility and the GARCH volatility.The empirical results show that the option has played its role as a "barometer" of the financial market.The investors are relatively rational and have an accurate prediction on the future market.At present,China's options market is effective,so introducting new options is feasible.