Study On The Term Structure Of Option Implied Volatility In China And Its Application

In recent years,my country’s financial derivatives market has launched,issued and listed various option products,injecting new vitality into the vigorous development of China’s capital market,and continuously improving my country’s financial system.The report of the 20 th National Congress of the Communist Party of China pointed out that it is necessary to continuously enhance the economic capabilities of financial services at the entity level and enrich the platforms and levels of the financial derivatives market in order to better provide comprehensive financial risk management services for the operation of the real economy.In the booming financial derivatives market,the option product market has introduced various types of financial derivatives one after another in compliance with the development requirements of the report of the 20 th National Congress of the Communist Party of China.The birth of these financial derivatives has,to a certain extent,improved the hierarchical system of my country’s financial market at the theoretical and practical levels,and provided investors with richer strategies and tools for risk management and speculative arbitrage.As of the end of 2022,my country’s financial derivatives trading market has launched a total of 36 option products.As of December 25,2022,12 option varieties have been released throughout the year.In 2021,the Guangzhou Futures Exchange will be established,and there will be a total of 8 exchanges in the country that list option varieties.On December 22,2022,the first variety and the country’s first new energy metal variety-industrial silicon option varieties were listed.Therefore,based on the development status of my country’s options market,this study will conduct an in-depth exploration of the nature,classification,calculation methods and application methods of the implied volatility of options,in order to provide some reference for investors when constructing investment portfolios.This article first briefly introduces the development status of my country’s option market,and explains the general calculation method of option margin.Since my country’s first SSE 50 ETF option product was launched for trading in 2015,several new option varieties have been issued and listed almost every year,and the types of options have become increasingly rich.The trading volume and transaction value of my country’s option market are showing an upward trend,the scale of the option instrument market is gradually expanding,the participants of options are more extensive,and the function effect of the option market is gradually improving.This article briefly explains the nature and classification of volatility,and also explains the calculation method of implied volatility.This article uses the BS model to calculate the implied volatility of options.At the same time,it also introduces the construction method of straddle option and its application method.my country’s options market started relatively late,and the development of the entire capital market is not yet very mature.In order to explore the impact of option trading information on the return rate of option strategies,this paper selects the transaction data of 10 option varieties listed and traded before 2020,constructs the slope of the term structure of option implied volatility,and studies its impact on the return rate of straddle option strategies.Impact.Through research,10 options are divided into 3 groups.The slope of the option implied volatility term structure of group A options has a significant positive impact on the return rate of the straddle option strategy.The implied volatility term structure of group B options The first-order lag of the slope of the structure has a significant positive impact on the return of the straddle option strategy,and the slope of the option-implied volatility term structure of group C options and the first-order lag of the slope of the option-implied volatility term structure There is no significant impact on the relationship between the term and the return of long straddle option strategy.Next,based on the results of empirical research,I used the slope of the term structure of implied volatility as an indicator to construct a straddle option quantitative trading strategy for backtesting.The positive effect of the rate of return of option quantitative trading strategy is significant.And backtest the straddle option strategy constructed with the slope of the option implied volatility term structure,and use the annualized rate of return,maximum backtest rate and Sharpe ratio to evaluate and analyze the strategy.Among them,the straddle option constructed by group A options The income effect of the quantization strategy is the best,the income effect of the straddle option quantitative strategy constructed by group B options is the second,and the income effect of the straddle option quantitative strategy constructed by group C option is the worst for some option varieties.Among them,the options contract varieties that were listed and traded the earliest have relatively high annualized return results after backtesting.Building investment strategies is increasingly effective.This paper provides some references for investors when constructing investment portfolios through the basic introduction of option implied volatility and the discussion of the relationship between the slope of the term structure of option implied volatility and the return rate of straddle option strategy portfolio.When using the slope of the option implied volatility term structure for trading operations in the actual market,it is recommended to trade option varieties that have been listed earlier.The slope of the option implied volatility term structure is also an excellent indicator when constructing investment strategy portfolios.