Abstract
This paper examines the impact of the volatility of spot market when Taiwan stock index option was introduced and announced. Our test consists in utilizing the Generalized Autoregressive Conditional Heteroskedastic (GARCH) process to generate time-series measure of the volatility of stock market in Taiwan. Empirical results verify that the volatility of spot market decreased significantly in the short-run, whereas it increased significantly in the long-run. During any time, the impacts of unexpected innovation decreased significantly in the spot market after announcement date and introduction date. And the persistence of conditional volatility decreased significantly in the short- run, whereas it increased significantly in the long-run.