The Intraday Relation between NYSE and Cboe Prices PDF Download
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Author: Brian C. Hatch
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
I extend the literature regarding price discovery across stock and option markets through an empirical model that allows information to flow through an error-correction term and volatility. NYSE prices tend to lead CBOE prices by at least thirty minutes over the entire six-year sample period. In addition, informed trading in the options market is revealed more strongly through persistence in volatility and the spillover of volatility to the stock market than it is through returns.
Author: Brian C. Hatch
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
I extend the literature regarding price discovery across stock and option markets through an empirical model that allows information to flow through an error-correction term and volatility. NYSE prices tend to lead CBOE prices by at least thirty minutes over the entire six-year sample period. In addition, informed trading in the options market is revealed more strongly through persistence in volatility and the spillover of volatility to the stock market than it is through returns.
Author: Kalok Chan
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
We study the intraday behavior of bid-ask spreads for actively traded CBOE options and for their NYSE-traded underlying stocks. We confirm previous findings that stocks have a U-shaped spread pattern; however, the options display a very different intraday pattern--one that declines sharply after the open, and then levels off. Our results suggest that both the degree of competition in market making and the extent of informed trading are important for understanding the intraday behavior of spreads.
Author: Bart Frijns
Publisher:
ISBN:
Category :
Languages : en
Pages : 29
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Book Description
The Chicago Board Options Exchange (CBOE) introduced the CBOE Volatility Index (VIX) in 1993. The index has come to act as the benchmark for stock market volatility and, more generally, investor sentiment. The VIX has proven to be very useful in forecasting the future market direction especially during high volatility periods. In order to expedite trading in volatility, as well as increase hedging opportunities, the CBOE introduced futures on the VIX (henceforth referred to as VXF) on March 26, 2004.We study the intraday dynamics of the VIX and VXF for the period January 2, 2008 to December 31, 2012. Applying a Vector Autoregression (VAR) model on daily data, we observe some evidence of causality from the VXF to the VIX. However, estimating a VAR using our ultra-high frequency data, we find strong evidence for bi-directional Granger causality between the VIX and the VXF. Overall, this effect appears to be stronger from the VXF to the VIX than the other way around. Impulse response functions and variance decompositions analysis further confirm the dominance of the VXF. Lastly, we show that the causality from the VXF to the VIX has been increasing over our sample period, whereas the reverse causality has been decreasing. This finding suggests that the VIX futures have become increasingly more important in the pricing of volatility. We further document that the VIX futures dominate the VIX more on days with negative returns, and on days with high values of the VIX, suggesting that on those days investors use VIX futures to hedge their positions rather than trading in the S&P 500 index options.
Author: Cheng Few Lee
Publisher: World Scientific
ISBN: 9814478830
Category : Business & Economics
Languages : en
Pages : 269
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Book Description
News Professor Cheng-Few Lee ranks #1 based on his publications in the 26 core finance journals, and #163 based on publications in the 7 leading finance journals (Source: Most Prolific Authors in the Finance Literature: 1959-2008 by Jean L Heck and Philip L Cooley (Saint Joseph's University and Trinity University). Market microstructure is the study of how markets operate and how transaction dynamics can affect security price formation and behavior. The impact of microstructure on all areas of finance has been increasingly apparent. Empirical microstructure has opened the door for improved transaction cost measurement, volatility dynamics and even asymmetric information measures, among others. Thus, this field is an important building block towards understanding today's financial markets. One of the pioneers in the field of market microstructure is David K Whitcomb, who retired from Rutgers University in 1999 after 25 years of service. David generously funded the David K Whitcomb Center for Research in Financial Services, located at Rutgers University. The Center organized a conference at Rutgers in his honor. This conference showcased papers and research conducted by the leading luminaries in the field of microstructure and drew a broad and illustrious audience of academicians, practitioners and former students, all who came to pay tribute to David K Whitcomb. Most of the papers in this volume were presented at that conference and the contributions to this volume are a lasting bookmark in microstructure. The coverage of topics on this volume is broad, ranging from the theoretical to empirical, and covering various issues from market architecture to liquidity and volatility.
Author: Kalok Chan
Publisher:
ISBN:
Category :
Languages : en
Pages : 39
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Book Description
This paper analyzes the intraday interdependence of price movements and order flows for actively traded NYSE stocks and their CBOE-traded options. Stock net-buy volume (buyer-initiated volume minus seller-initiated volume)has strong predictive ability for subsequent stock and option returns, but call or put net-buy volume has little predictive ability. Furthermore, stock returns lead option returns more than they lag even after controlling for net-buy volume. Therefore, our results indicate that order flows in the stock market are informative but order flows in the option market are not, and suggest that informed investors submit trades primarily in the stock market rather than in the option market. There is also some evidence for the non-informational linkage between the two markets. Stock net-buy volume is positively (negatively) related to lagged call (put) returns, suggesting that option dealers dynamically hedge their outstanding short option positions when the option deltas change. However, call or put net-buy volume is not correlated with stock net-buy volume or lagged stock returns, suggesting that option traders do not use options for hedging or at least do not readjust their hedged positions frequently.
Author: United States. Securities and Exchange Commission
Publisher:
ISBN:
Category : Securities
Languages : en
Pages : 1110
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Book Description
Author: Frédéric Abergel
Publisher: John Wiley & Sons
ISBN: 1119952786
Category : Business & Economics
Languages : en
Pages : 194
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Book Description
The latest cutting-edge research on market microstructure Based on the December 2010 conference on market microstructure, organized with the help of the Institut Louis Bachelier, this guide brings together the leading thinkers to discuss this important field of modern finance. It provides readers with vital insight on the origin of the well-known anomalous "stylized facts" in financial prices series, namely heavy tails, volatility, and clustering, and illustrates their impact on the organization of markets, execution costs, price impact, organization liquidity in electronic markets, and other issues raised by high-frequency trading. World-class contributors cover topics including analysis of high-frequency data, statistics of high-frequency data, market impact, and optimal trading. This is a must-have guide for practitioners and academics in quantitative finance.
Author: Stephen Satchell
Publisher: Elsevier
ISBN: 0080494978
Category : Business & Economics
Languages : en
Pages : 417
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Book Description
'Forecasting Volatility in the Financial Markets' assumes that the reader has a firm grounding in the key principles and methods of understanding volatility measurement and builds on that knowledge to detail cutting edge modelling and forecasting techniques. It then uses a technical survey to explain the different ways to measure risk and define the different models of volatility and return.The editors have brought together a set of contributors that give the reader a firm grounding in relevant theory and research and an insight into the cutting edge techniques applied in this field of the financial markets.This book is of particular relevance to anyone who wants to understand dynamic areas of the financial markets.* Traders will profit by learning to arbitrage opportunities and modify their strategies to account for volatility.* Investment managers will be able to enhance their asset allocation strategies with an improved understanding of likely risks and returns.* Risk managers will understand how to improve their measurement systems and forecasts, enhancing their risk management models and controls.* Derivative specialists will gain an in-depth understanding of volatility that they can use to improve their pricing models.* Students and academics will find the collection of papers an invaluable overview of this field.This book is of particular relevance to those wanting to understand the dynamic areas of volatility modeling and forecasting of the financial marketsProvides the latest research and techniques for Traders, Investment Managers, Risk Managers and Derivative Specialists wishing to manage their downside risk exposure Current research on the key forecasting methods to use in risk management, including two new chapters
Author: Sereno Stansbury Pratt
Publisher:
ISBN:
Category : Securities industry
Languages : en
Pages : 322
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Book Description
Author: G. Constantinides
Publisher: Elsevier
ISBN: 0080495087
Category : Business & Economics
Languages : en
Pages : 698
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Book Description
Volume 1B covers the economics of financial markets: the saving and investment decisions; the valuation of equities, derivatives, and fixed income securities; and market microstructure.
