Elisabeth Diehl presenterar sitt examensarbete

Implementation and Evaluation of a New Volatility Index Methodology

Abstract

This Master's thesis is discussing volatility indices and their
utilisation on the financial market. In 2003, the Chicago Board
Options Exchange (CBOE) applied a new methodology to calculate its
volatility index VIX. This methodology implies several advantages, for
instance it has a more robust and explicit economic interpretation
compared to its predecessor which was based directly on the
Black-Scholes option pricing theory. In contrast, the new volatility
index methodology is derived from the replication of a variance swap
which has facilitated the introduction of derivative products based on
the volatility index. Given the benefits of the new index methodology,
this thesis aims to investigate how this new methodology can be
implemented on the Canadian market and what consequences such an
implementation would generate.