Basic information on financial databases: cook books, tips and tricks & economic news

This blog contains schematic easy to grasp - hands on - help in performing searches in economic databases, making work sets and making them inter-exchangeable between the databases.

* Disclaimer. I am not a finance professional. Most posts are the result of personal findings.

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Volatility and Volatility Indices

The financial markets are always interested in movements and trends.
One way of keeping track and predicting is measuring volatility of equities or or indices, currencies etc.

Volatility can also be calculated through standard deviation or variance between the returns (Ri) 
The highter the volatility, the more it is likely for the values to fluctuate (wildly).
Stable equities, on the other hand, show a low volatility.

Volatility "lives in the past" as it measures movements in the past.
Oppositie are options, which predict movements, in other words expected volatility.
The higher the expected volatility, the more an equity will cost.

Example: in the period preceding publication of (bi)annuals the expected volatilty will be higher (and thus more expensive).

Volatility Index
Another way of decribing volatilty is that it measures risk (fear or anxiety), be it equities, indices or markets.
A volatilty index aims at measures risk of markets.
Chicago CBOE (Chicago Board Options Exchange) deals with volatilties of S&P 500, the VIX.
VIX is quoted in percentage points and that expresses the expected movement of a 30 day period of time, which then is annualized.

Another method of measuring volatilty is using the BETA. This sets a securitie's returns (Ri) against the return of a benchmark (usually the S&P50 is used)

The Beta can be drawn from the Static Search Menu through ready made formulas.

The button leads to the expression picker.
Type 'volatility' and all ready made expressions will show.


Wharton WRDS
Wharton Compustat contains a seperate Database called  CBOE Indexes.
The CBOE (Chicago Board Options Exchange) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices.
The New VIX is based on S&P 500 index option prices and incorporates information from the volatility "skew" by using a wider range of strike prices rather than just at-the-money series. 

First of all set your time scope. (range)
Swecond: these are the possible CBOE:

Note the possible data. It's the index as a whole, and only defaults.
Last step: out. recommended is storing as TABulated.TXT

Opening a TAB-delimited file in Excel. A wizard will guide you there. 
Take care to select it concerns a DOS (PC 8) file. The delimitation will be recognized by the wizard. 
Last, select all columns by scrolling to the right pressing SHIFT-CLICK and make certain to press radio button text.
Opening your compustat save < click  link

Units: percentage points

 Philadelphia  Stock Exchange PHLX: (money market)
Two choices: currency options and implied volatility

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