Volatility index for Warsaw Stock Exchange. Rules and properties

Tomasz K. Wisniewski 

Gielda Papierow Wartosciowych (GPW), Ksiazeca 4, Warszawa 00-498, Poland

Abstract

The Warsaw Stock Exchange was founded in 1991 as a joint stock company held solely by the State Treasury. The WSE conducts trading in financial instruments on four markets: The Main List (in operation since beginning, supervised by the Polish FSA and notified to the European Commission as a regulated market), NewConnect (organized and maintained by the WSE as alternative trading system), Catalyst (debt instrument market founded on September 30, 2009) and Energy Market (transaction platform for energy deals and energy-related futures). From November 9, 20100 Warsaw bourse is a public company with shares listed on Main List.

At the end of 2012 The Warsaw Stock Exchange was the largest and most dynamically growing market of Central and Eastern Europe (CEE) with more than 800 listed companies, futures contracts, option, ETFs, certificates and structured products.

The Warsaw Stock Exchange calculate and publish 28 indices: markets (WIG, NCIndex), size (WIG20, mWIG40, sWIG80), national (WIG-CEE, WIG-Poland, WIG-Ukraine), thematic (WIGdiv, RESPECT), industry and other (bonds, IF).

Main role of indices is describing the market and comparing the return on different type of investment. From 1896, first publication of DJIA, first exchange index, the aim of indices is still changes. Indices are not market indicators or benchmark. There are source of portfolio management (passive investment found or ETFs) and underlying for derivatives (futures contract, option).

Due to latest waves the Warsaw Stock Exchange is going to launch volatility index.  The volatility index is the benchmark for stock market volatility and measure market expectations of near term volatility conveyed by stock index option prices. First volatility index was VIX, which is calculated based on S&P100 option prices from 1993, however now is calculated based on options on S&P500.

The hypothetical Warsaw Stock Exchange volatility index was constructed for option on WIG20 index (VWIG). Decision process was supported by particular analysis of options
 

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Presentation: Oral at Current Economic and Social Topics CEST2013, Symposium on Financial Market Analysis, by Tomasz K. Wisniewski
See On-line Journal of Current Economic and Social Topics CEST2013

Submitted: 2013-05-13 17:54
Revised:   2014-01-22 12:02