Quality Issues of Implied Volatilities of Index and Stock Options in the OptionMetrics IvyDB Database

The implied volatilities provided by OptionMetrics in the IvyDB database suggest substantial deviations from put-call parity that do not really exist. In S&P 500 options, artificial deviations occur because OptionMetrics uses non-synchronous index and option prices and an average implied dividend yield rather than the implied dividend yield for the specific term of each option. In EuroStoxx 50 options, large deviations occur even though the original option prices are perfectly in line with the put-call parity. The implied volatilities of stock options in Europe show clusters of exceptional deviations that are caused by incorrect dividend information and other issues related to dividends. The implied volatilities of stock options in the US also show (but much less frequently) anomalies due to outdated dividend projections. More importantly, the timing mismatch of one minute between the option quotes (recorded at 15:59) and the closing share prices (few seconds after 16:00) generally increases the variability of implied volatility spreads between puts and calls. In addition, it results in considerable distortions at the outbreak of the COVID-19 pandemic and strongly affects aggregate implied volatility spreads