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The behavior of the volatility implicit in the prices of stock index options

Journal of Financial Economics 1988 22(1), 103-122
We examine stock-market volatility around the quarterly expirations of stock index futures contracts and nonquarterly expirations of stock index options, using estimates of the volatility implicit in the option prices. The option prices reflect increases in the volatility of the underlying stock indexes around both quarterly and nonquarterly expiration dates. Analysis of the residual returns on index options provides evidence consistent with an unexpected increase in market volatility around expiration dates.