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Friday, October 06, 2006

Volatility of the Indian equity market

The mass media often has a conspiracy theory view of stock market volatility. E.g. see this piece by Sucheta Dalal. The empirical evidence supports more prosaic interpretations. I did a talk at ICRIER on the subject of Indian stock market volatility. The PDF file of the slideshow might interest you.


  1. Just wanted to kno your views on a couple of things:

    1)There is no real market for volatility in the Indian equity markets right now. The listed options market (for both index and single stocks) remains small when compared to the index and stock futures market. Are there any steps that SEBI/NSE have to take so that listed options market kicks off??

    2)The onshore OTC market for equity derivatives also remains absent. Will its opening up lead to any advantages in terms of price discovery, efficiency etc? In Europe (and in Asian countries like Japan, Kora and Hong Kong) OTC market activity has a huge effect on spiking up/dampening volatility at different times..

  2. I think that the ATM Nifty options are actually at a point where you can do long-vol or short-vol type positions of fair size - I think it's not hard to have notional values like $1 million. What is missing is the human capital that thinks vol.

    The onshore OTC equity derivatives market is indeed a big gap.


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