Quality issues of implied volatilities of index and stock options in the OptionMetrics IvyDB database

For stock and index options in the United States, OptionMetrics records prices at 3:59 p.m., not 4:00 p.m. as assumed in previous literature. The resulting 1‐min time discrepancy with closing share prices creates artificial variability in implied volatility spreads and strongly affects market‐wide s...

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Bibliographic Details
Published in:The journal of futures markets 2024-05, Vol.44 (5), p.854-875
Main Author: Wallmeier, Martin
Format: Article
Language:English
Subjects:
COVID-19
Pandemics
Prices
Volatility
Citations: Items that this one cites
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Summary:For stock and index options in the United States, OptionMetrics records prices at 3:59 p.m., not 4:00 p.m. as assumed in previous literature. The resulting 1‐min time discrepancy with closing share prices creates artificial variability in implied volatility spreads and strongly affects market‐wide spreads. It leads to particularly large distortions at the onset of the COVID‐19 pandemic. For index options in Europe, OptionMetrics data show large deviations from put‐call parity even though the original option prices match the parity exactly. Finally, the implied volatilities of stock options in Europe show clusters of exceptional deviations due to incorrect dividend information.
ISSN:0270-7314
1096-9934
DOI:10.1002/fut.22495