Portfolio Research Based On Implied Volatility

Volatility has a wide range of applications in the financial field,such as the construction of investment portfolios,the calculation of VaR at risk,the pricing of assets,and so on.There are many models for the prediction of volatility,but in general,the prediction methods of future volatility can be divided into two categories:one is to predict future volatility directly based on existing historical data,that is,history Volatility;the other is based on the price of the underlying financial asset options to promote future volatility,because options reflect the market's expectations for the future,the volatility extracted in this way is called implicit volatility,mainly BS implicit Volatility and model-free implied volatility.Regarding the construction of portfolios,the famous American economist Markowitz put forward the theory of portfolio management as early as 1952,and established a portfolio optimization model-the mean-variance model(MV model),which became the development of portfolio theory The basics.Many scholars have carried out follow-up research on this theory and reached positive conclusions.This article will introduce implied volatility into the portfolio construction process of the mean-variance model.Considering that the current development of the mainland options market is not perfect,there are only 50 ETF options,and there are no stock options for trading.Therefore,the Hong Kong market with a more developed option market is selected as the research object.The selected sample time range is from 2011 to 2014,Use BS implied volatility and model-free implied volatility to estimate market volatility,use binary tree option pricing to reverse implied volatility of stock prices,and use the resulting implied volatility to estimate the full implied Covariance matrix instead of the general covariance matrix,which is then used to calculate the implicit risk of the portfolio,and finally the optimal weight of each asset in the portfolio is obtained,which is then compared with the traditional MV model,traditional investment strategies,and market portfolio.Compare effects.Three main conclusions can be drawn.First,the implied volatility of the model-free contains more useful information than the implied volatility of the BS model;Second,in Hong Kong options market,the model-free implied volatility is more suitable for describing the market volatility than the implied volatility of BS;Third,it is feasible to use implied volatility to improve the traditional MV model,and the additional information(forward information)contained in implied volatility can increase the effect of portfolio constructed by the model,making it better than the traditional MV model.