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Investigations into Alternative Sources of Disturbance and Bias in the Implied Volatility Surface
Byler, Daniel M.
Byler, Daniel M.
Abstract
This paper demonstrates that crude estimators can correctly identify statistically significant technical patterns in major index data. The introduction of intra-day prices significantly improves a crude estimators' ability to identify technical barriers. Double tops are associated with increases in the prices of puts which indicates that supply and demand dynamics may impact options prices in ways not previously examined. Moreover, this may be a step in the right direction of identifying the supply and demand identification in options markets. Following in line with other work, this is in no way negates the Black-Scholes-Merton delta hedging instantaneous replication argument. It simply demonstrates that the Black-Scholes-Merton approach offers a very powerful but incomplete theory of options pricing.
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Thesis is part of Honors ETD pilot project, 2008-2013. Migrated from Dspace in 2016.
Date
2009-05-14
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Keywords
Options Pricing, Technical Analysis, Implied Volatility, Volatility, Double Tops, Kernel Smoothing, Double Bottoms, Black-Scholes-Merton, Supply, Demand
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Department
Economics