Entropy as a measure of implied volatility in options market

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dc.contributor.authorTaneja, H.C.
dc.contributor.authorBatra, Luckshay
dc.date.accessioned2024-07-12T20:47:58Z
dc.date.available2024-07-12T20:47:58Z
dc.date.issued2019en_US
dc.departmentFakülteler, İnsan ve Toplum Bilimleri Fakültesi, Matematik Bölümüen_US
dc.description.abstractVolatility estimation is critical for several reasons for stakeholders in stock markets and the concept of Shannon entropy originated in the communication system has been extensively applied in finance. There are several well-known traditional techniques in the literature to measure stock market volatility, in this communication, we focus on comparing two popular techniques, the standard deviation and implied volatility with a methodology based on information entropy. In our study, the empirical analysis is conducted so as to find some relationship between the three different approaches: implied volatility, historical volatility and entropy and all three give a similar kind of sense, maybe not of the same scale but all of them follow the same trend. This paper focuses on the behavior of Indian markets between 2001-2017 for comparative analysis. We have also tried to model implied volatility as a linear combination of historical volatility and entropy and found that the model was heavily dependent on the values of entropy. Calculating implied volatility evolves numerical complexities and replacing it with entropy simplifies the problem. We have used Shannon entropy; using generalised entropies (i.e., entropy with additional parameters) may give better approximations.en_US
dc.identifier.citationTaneja, H. C. ve Luckshay, B. (2019). Entropy as a measure of implied volatility in options market. International Conference of Mathematical Sciences (ICMS 2019). s. 193.en_US
dc.identifier.endpage194en_US
dc.identifier.isbn978-605-2124-29-1
dc.identifier.startpage193en_US
dc.identifier.urihttps://hdl.handle.net/20.500.12415/2071
dc.language.isoenen_US
dc.publisherMaltepe Üniversitesien_US
dc.relation.ispartofInternational Conference of Mathematical Sciences (ICMS 2019)en_US
dc.relation.publicationcategoryUluslararası Konferans Öğesi - Başka Kurum Yazarıen_US
dc.rightsCC0 1.0 Universal*
dc.rightsinfo:eu-repo/semantics/openAccessen_US
dc.rights.urihttp://creativecommons.org/publicdomain/zero/1.0/*
dc.snmzKY01433
dc.subjectShannon entropyen_US
dc.subjectStock market volatilityen_US
dc.subjectImplied volatilityen_US
dc.titleEntropy as a measure of implied volatility in options marketen_US
dc.typeArticle
dspace.entity.typePublication

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