• Journal of Distribution Science
• /
• v.13 no.5
• /
• pp.53-60
• /
• 2015

Purpose - The purpose of this paper is to shed light on the importance of the slope and curvature of the volatility curve implied in option prices in the KOSPI 200 options index. A number of studies examine the implied volatility curve, however, these usually focus on cross-sectional characteristics such as the volatility smile. Contrary to previous studies, we focus on time-series characteristics; we investigate correlation dynamics among slope, curvature, and level of the implied volatility curve to capture market information embodied therein. Our study may provide useful implications for investors to utilize current market expectations in managing portfolios dynamically and efficiently. Research design, data, and methodology - For our empirical purpose, we gathered daily KOSPI200 index option prices executed at 2:50 pm in the Korean Exchange distribution market during the period of January 2, 2004 and January 31, 2012. In order to measure slope and curvature of the volatility curve, we use approximated delta distance; the slope is defined as the difference of implied volatilities between 15 delta call options and 15 delta put options; the curvature is defined as the difference between out-of-the-money (OTM) options and at-the-money (ATM) options. We use generalized method of moments (GMM) and the seemingly unrelated regression (SUR) method to verify correlations among level, slope, and curvature of the implied volatility curve with statistical support. Results - We find that slope as well as curvature is positively correlated with volatility level, implying that put option prices increase in a downward market. Further, we find that curvature and slope are positively correlated; however, the relation is weakened at deep moneyness. The results lead us to examine whether slope decreases monotonically as the delta increases, and it is verified with statistical significance that the deeper the moneyness, the lower the slope. It enables us to infer that when volatility surges above a certain level due to any tail risk, investors would rather take long positions in OTM call options, expecting market recovery in the near future. Conclusions - Our results are the evidence of the investor's increasing hedging demand for put options when downside market risks are expected. Adding to this, the slope and curvature of the volatility curve may provide important information regarding the timing of market recovery from a nosedive. For financial product distributors, using the dynamic relation among the three key indicators of the implied volatility curve might be helpful in enhancing profit and gaining trust and loyalty. However, it should be noted that our implications are limited since we do not provide rigorous evidence for the predictability power of volatility curves. Meaning, we need to verify whether the slope and curvature of the volatility curve have statistical significance in predicting the market trough. As one of the verifications, for instance, the performance of trading strategy based on information of slope and curvature could be tested. We reserve this for the future research.

• The Journal of the Petrological Society of Korea
• /
• v.28 no.1
• /
• pp.1-13
• /
• 2019

The characteristics of the rock cleavage of Jurassic Geochang granite were analysed using the parameters from the length and spacing-cumulative frequency diagrams. The evaluation for three planes and three rock cleavages was performed using the 25 parameters such as (1~2) slope angle(${\alpha}^{\circ}$and ${\beta}^{\circ}$), (3) intersection angle(${\alpha}-{\beta}^{\circ}$), (4) exponent difference(${\lambda}_S-{\lambda}_L$), (5~12) length of line(oa, ob, ol, os, ss', ll' and sl') and (13~15) length ratio(ol/os, ss'/ll' and ll'/sl'), (16) mean length((ss'+ll')/2), (17~23) area (${\Delta}oaa^{\prime}$, ${\Delta}obb^{\prime}$, ${\Delta}obb^{\prime}$, ${\Delta}oaa_a^{\prime}$, ${\Delta}obb_a^{\prime}$, ${\Delta}ll^{\prime}s^{\prime}$, ${\Delta}ss^{\prime}l^{\prime}$ and ⏢$ll^{\prime}ss^{\prime}$) and (24~25) area difference(${\Delta}obb^{\prime}-{\Delta}oaa^{\prime}$ and ${\Delta}obb_a^{\prime}-{\Delta}oaa_a^{\prime}$). Firstly, the values of the 11 parameters(group I: No. 1, 3~4, 7, 9~10, 13, 15~16, 20 and 25), the 3 parameters(group II: No. 5, 8 and 17) and the 2 parameters(group III: No. 12 and 22) are in orders of H(hardway) < G(grain) < R(rift), R < G < H and G < H < R, respectively. On the contrary, the values of parameters belonging to the above three groups show reverse orders for three planes. Secondly, the generalized chart for three planes and three rock cleavages were made. From the related chart, the distribution types formed by the two diagrams related to lengths and spacings were derived. The diagrams related to spacings show upward curvature in the chart of rift plane(G1 & H1, R') and hardway(H1 & H2, H). On the contrary, the diagrams related to lengths show downward curvature. These two diagrams take the form of a convex lens in the upper section. Besides, the two diagrams cross each other in the lower section. The overall shape formed by the above two diagrams between three planes($H^{\prime}{\rightarrow}G^{\prime}{\rightarrow}R^{\prime}$) and three rock cleavages($R{\rightarrow}G{\rightarrow}H$) display in reverse order. Lastly, these types of correlation analysis is useful for discriminating three quarrying planes.