Arbitrage, volatility, and pricing options on IBEX-35 spanish indexan empirical examination

  1. Juan José García Machado
  2. Juan José de la Vega Jiménez
  3. Santiago García González
Universidad, Sociedad y Mercados Globales
  1. Emilio José de Castro Silva (coord.)
  2. Francisco José Díaz de Castro (coord.)

Publisher: Asociación Española de Dirección y Economía de la Empresa (AEDEM)

ISBN: 978-84-691-5667-4

Year of publication: 2008

Pages: 69-83

Congress: Asociación Europea de Dirección y Economía de Empresa. International Conference AEDEM (17. 2008. Salvador de Bahía)

Type: Conference paper


This paper1 analyses the applicable volatility and the degree of risk exposure of the issuers of call options on the IBEX-35 stock index. Firstly, we compare the theoretical premiums with the market ones, including both fixed and movable volatility in order to check the reliable estimation of the Black-Scholes model. At the same time, it gives evidences to see if the arbitrage opportunities have been made use of balancing the prices on the Spanish option market. Finally, we also compare the forecasted volatility with the market one (the implied) to choose which is the most suitable (fixed o movable) to a dynamic hedge strategy with replicating portfolio from the issuers� point of view.