טכניון מכון טכנולוגי לישראל
הטכניון מכון טכנולוגי לישראל - בית הספר ללימודי מוסמכים  
M.Sc Thesis
M.Sc StudentAyoub Mahmod
SubjectForecasting the Tel-Aviv 25 Index Return using Options
DepartmentDepartment of Industrial Engineering and Management
Supervisors Dr. Gil Cohen
Dr. Mira Baron
Full Thesis text - in Hebrew Full thesis text - Hebrew Version


Abstract

In this thesis we attempt to forecast the returns of the TA-25 Index (MAOF Index) several days before the options on this index mature (the Thursday preceding the last Friday of each month) by using data from the options exchange. Our objective is to examine to what extent MAOF players can manipulate the index returns at maturity in order to maximize the value of the investment position they choose. In other words, to what extent is the Israeli main stock market affected by the options exchange or financial derivatives exchange. The proposed model will use the following: the Open Interest (open positions) on the MAOF exchange (the number of options issued on the exchange), the number of operation volume for the different options, and the standard deviations inherent in the option prices (Implied Volatility)  that represent the index returns at maturity preferred by most of the MAOF players. This model will be used to forecast the index's return and accordingly also to forecast the expected index at maturity up to ten days before the maturity date of the options. The results indicate that with the help of the open interest and the inherent standard deviations it is possible to forecast the returns of the index up to four days before the maturity date. These findings reinforce claims regarding the abilities of MAOF players to influence the index and to divert it in the desired direction in accordance with their position.