A Study of Intraday Volatility Trading Utilizing High Frequency Data and the Microstructure Effects of Implementation.

摘要

In this dissertation I examine an intraday volatility trading strategy by comparing two different measures of volatility: option-implied volatility and beta-implied volatility. The methodology of pairs trading is applied to these two measures of volatility and is empirically tested through the use of high frequency data (minute-by-minute) collected over a time frame of three months. I calculate and compile the volatility measures and search for departures in the log of the ratio of the two measures of volatility from one another. Any deviations indicate market inefficiencies and possible profit opportunities. The microstructure of the market must then be considered in order to determine whether or not the deviations are large enough to warrant a trade given the costs of trading. I find that intraday profits do exist if one were to follow this methodology of employing a pairs trading strategy to these volatility measures.