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

Wallmeier, Martin

doi:10.1002/fut.22495

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jfutm_2024_qualityissuesofimpliedvolatilities

Journal article

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

BP2-STS

Wallmeier, Martin ORCID University of Fribourg

2024

Published in:

The Journal of Futures Markets. - Wiley Periodicals LLC. - 2024, p. 1-22

English For stock and index options in the US, OptionMetrics records prices at 3:59 p.m., not 4:00 p.m. as assumed in previous literature. The resulting one-minute 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.

Faculty

Faculté des sciences économiques et sociales et du management

Department

Département des sciences du Management

Language