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Book The Lead lag Relationship Between the Options and Stock Markets Prior to Earnings Announcements and the Effect of Securities Regulation

Download or read book The Lead lag Relationship Between the Options and Stock Markets Prior to Earnings Announcements and the Effect of Securities Regulation written by C. Mitchell Conover and published by . This book was released on 1995 with total page 466 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Book Lead and Lag Relationship Between Stocks and Options

Download or read book Lead and Lag Relationship Between Stocks and Options written by Alen Vukic and published by . This book was released on 1998 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Book Lead and lag relationships between stocks and options

Download or read book Lead and lag relationships between stocks and options written by Angelo Ranaldo and published by . This book was released on 1999 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Book Implied Volatility in Option Prices and the Lead Lag Relation between Stock and Option Prices

Download or read book Implied Volatility in Option Prices and the Lead Lag Relation between Stock and Option Prices written by Hun Y. Park and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We show that if a particular lead-lag relation exists between the option and stock markets, the implied volatility in option prices can be biased depending on the level of the true volatility. The higher the true volatility, the more upward (downward) biased the implied volatility will be, if the option market leads (lags) the stock market. We present some empirical results on the intraday implied volatility in option prices as an application or evidence of the theory.

Book The Cross Sectional Relationship between Trading Costs and Lead Lag Effects in Stock Option Markets

Download or read book The Cross Sectional Relationship between Trading Costs and Lead Lag Effects in Stock Option Markets written by Matthew L. O'Connor and published by . This book was released on 1999 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Prior empirical research has failed to settle the question of lead/lag effects between stock and option markets. This study investigates the relation between cross-sectional differences in trading costs and intraday lead/lag effects in stock and option markets. The data for the study comprise 19 firms sampled at five-minute intervals over a two-month period. Consistent with a trading cost hypothesis, results indicate overall stock market leading behavior. However, the lead appears to be related to option market trading costs. This study uses an error correction model framework to investigate the lead/lag effects. This approach provides information on both the long run equilibrating process as well as the short term interactions between stock and option markets. Information regarding the long run equilibrating process is important to the overall understanding of lead/lag effects and cannot be determined from time series models of differenced data. Specific criteria for assessing lead/lag effects in cointegrated series are also proposed. One advantage of these new criteria is their ability to identify leading behavior in the presence of feedback. All models are estimated with quote data and are constructed to eliminate overnight effects. Hence, the results are robust to previously identified distortions due to closing, overnight, and potential non-trading effects. However, caution should be employed in generalizing the results as the study covers a two-month trading period for a limited number of firms.

Book Lead Lag Relationships between Short Term Options and the French Stock Index CAC 40

Download or read book Lead Lag Relationships between Short Term Options and the French Stock Index CAC 40 written by Alexis Cellier and published by . This book was released on 2004 with total page 15 pages. Available in PDF, EPUB and Kindle. Book excerpt: We compare the lead lag relationships with three time-deformations (clock time, transaction time and volume time) and four lengths of intervals from five to thirty minutes. According to the options we study, we use the Cox, Ross and Rubinstein (1979) pricing model to take into account the dividends and the American style of the options. For call options, we evidence a lead of the cash market. This lead diminishes when the length of the interval increases. For put options, we observe a contemporaneous relationship. Consequently, we confirm the robustness of these relationships relative to the hypothesis on the information flow. However, as the length increases the relation becomes contemporaneous. Thus, this relation is short term but is strong enough to affect a longer interval. Moreover, we must use several lengths to actually estimate the duration of this relationship.

Book Temporal Price Relation between Stock and Option Markets and a Bias of Implied Volatility in Option Prices

Download or read book Temporal Price Relation between Stock and Option Markets and a Bias of Implied Volatility in Option Prices written by Phelim P. Boyle and published by . This book was released on 2000 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: We show that if a particular temporal relation exists between the option and spot markets, the implied volatility in option prices can be biased depending on the level of the true volatility. The higher the true volatility, the more upward (downward) biased the implied volatility will be, if the option market leads (lags) the spot market. Using intraday data of the Samp;P 500 index options, we show that the option market leads the spot market at least in the sample. More importantly, the implied volatility is biased due to the lead-lag relationship, and the bias is more profound when the market is more volatile.

Book The Lead Lag Relation between Spot and Futures Markets Under Different Short Selling Regimes

Download or read book The Lead Lag Relation between Spot and Futures Markets Under Different Short Selling Regimes written by Joseph K. W. Fung and published by . This book was released on 2002 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the lead-lag relation between index futures and the underlying index under three types of short-selling restrictions on stocks in Hong Kong. Our results indicate that lifting short-selling restrictions can enhance the informational efficiency of the stock market relative to the index futures. We also investigate the impact of two market characteristics, market conditions and the magnitude of mispricing on the lead-lag relations under different short-selling regimes. Our findings suggest that if we remove restrictions, the contemporaneous price relation between the futures and cash markets becomes stronger particularly in the falling market and when the cash market is relatively overpriced.

Book The Market Microstructure Linkages of Emerging Options Market and Stock Market

Download or read book The Market Microstructure Linkages of Emerging Options Market and Stock Market written by Vinay Kumar Apparaju and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The theory of options pricing portends that option prices are derived from the underlying asset prices and their price can only be discovered after the price of the underlying asset is known in the frictionless market. The frictions like information asymmetry would mean that the informed could either trade their information in options market or in stock markets. In such a situation, the options market would send cues for the stock market. The major theoretical contention is, therefore, do the underlying asset prices have information for the price discovery of options? On the contrary, do options prices have information for the underlying asset? These questions are previously researched and apparently compelling evidence is found on both sides of the divide. Besides, the lead-lag relationships between both markets are of immense significance given the participants' ability to garner private information and find suitable avenues for investing. Therefore, it is only germane to research this question. The present paper attempts to explore the micro-structural linkages in terms of information links, inventory-based links and hedging-based links between options markets and stock markets by putting all the arguments in perspective with an emerging market context. The results of the present study suggest that the options markets in India have information for stock market, while stock market has little information for options market. The present study finds evidence that support hedging-based links between the options and stock market, while the results are weak for inventory control.

Book The Informational Role of Stock and Option Volume

Download or read book The Informational Role of Stock and Option Volume written by Kalok Chan and published by . This book was released on 1999 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Book Do Warrants Lead the Underlying Stocks and Index Futures

Download or read book Do Warrants Lead the Underlying Stocks and Index Futures written by and published by . This book was released on 2001 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The lead-lag relation between options and stocks has been a subject of controversy for years with conflicting findings in the literature. In this thesis, we present an intuitive method to examine the lead-lag relation, if any, in the tick-by-tick data of covered warrants and their underlying stocks or underlying index futures. Our method is non-parametric and needs no assumptions which are critical to the regression-based methods. We find that the electronically traded warrants do not lead stocks or index futures; the movements in the warrants' quotes provide little information about the quotes of the underlying stocks or index futures. Instead, our analysis shows that the stocks and index futures lead the warrants. Moreover, if all transaction costs are ignored, we can use the movements of underlying assets' quotes to generate profits by trading warrants that are both statistically and economically significant. However, as soon as the bid-ask spread is accounted for, the profits disappear and sizable losses are incurred instead. These findings are consistent with a central tenet of financial economics: arbitraging two intimately related markets for a profit is not possible in the presence of market frictions.