| Summary: | 碩士 === 東吳大學 === 財務工程與精算數學系 === 99 === Lots of studies discussed about the relationships between volatility indices and future returns on stock markets. However, few researches directly told us how to use these indices to avoid market crash risk. Therefore, this study focuses on the relationship between implied volatilities of index options and the market crash. We demonstrate, using all at-the-money options on TAIEX and VIX index from 2003-2010, that 1) the relationship on the future return on TAIEX and volatility indices isn’t exist. 2) before market crash in TAIEX, level of call option implied volatility, put option implied volatility, VIX index, and five day return on VIX index are higher than normal periods. 3) we could use these indices to build a hedging program, it increases value of investment portfolio and decreases market crash risk.
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