Risk and Return Analysis of Derivative Options on Selected Large-Cap Stocks Using the India VIX Model
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Risk and Return Analysis of Derivative Options on Selected Large-Cap Stocks Using the India VIX Model
Suraj Alva, Awin Eric Cutinha, Rikitha Pais
Abstract
The rapid expansion of the derivatives market in India has intensified the need for effective risk–return evaluation tools, particularly in volatile market conditions. This study analyses the risk and return characteristics of derivative options on selected large-cap stocks listed on the National Stock Exchange (NSE), using the India Volatility Index (India VIX) as a proxy for implied market volatility. Ten large-cap companies forming part of the NIFTY 50 index were selected based on liquidity and active options trading. Using secondary data sourced from NSE, Moneycontrol, and India VIX archives, the study employs statistical tools such as average returns, standard deviation, beta, correlation, and regression analysis. The findings indicate that option returns of most selected large-cap stocks exhibit weak and statistically insignificant relationships with India VIX movements. While volatility remains a critical risk indicator, the results suggest that India VIX alone does not significantly explain stock-specific option returns. The study highlights the importance of combining volatility indicators with firm-level and market-specific factors for informed derivative trading and risk management decisions.
Keywords: Derivatives, Options, Risk and Return, India VIX, Large-Cap Stocks, NSE
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