The Analysis Of Hong Kong Volatility Index On The Basis Of Hang Seng Index Option

CBOE VIX Index is an effective indicator of future market fluctuations which shows the changes in market investors’ expectations of future asset prices, providing investors with a hedging tool, and is widely used in practice. The construction of VIX index is mainly based on the implied volatility of options trading data e. However, due to that currently there is no standardized option product in Chinese market, no volatility index can indicate the fluctuation in mainland stock market. This paper attempts to investigate Hong Kong market and build the Hong Kong market volatility index to study its indicating ability of Hong Kong market and the mainland market.We try to study through three parts in this paper:Firstly, based on the Hong Kong Hang Seng Index Options and CBOE VIX index, we selected eight calls and puts money options of this month and next month to calculate Hong Kong market volatility index, which denotes Hang Seng Volatility- HSV; Secondly, by the use of regression models, we studied the relationship between the HSV and Hong Kong stock market, empirical test proved the the existence of a significant negative correlation between them, and this relationship showed asymmetry; Finally, stepwise regression model was used to study HSV’s spillover effect on the mainland stock market through a overall test of the mainland market and the tests for the Shanghai Stock Exchange and Shenzhen stock Exchange, results showed that HSV index can effectively predict fluctuations in the mainland stock market.