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.

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:

Download or read book Trading Costs and the Relative Rates of Price Discovery in Stock Futures and Option Markets written by Jeff Fleming and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In frictionless and rational markets, perfect substitutes must have the same price. In markets with trading costs, however, price differences may be as large as the costs of executing the arbitrage between markets. Moreover, if trading costs differ, trading activity will tend to be concentrated in the lowest-cost market. This study tests the differential trading cost hypothesis by examining the rate at which new information is incorporated in stock, index futures, and index option prices. The lead/lag return relations among markets are consistent with their relative trading costs. Prices in the index derivative markets appear to lead prices in the stock market. At the same time, index futures prices tend to lead index option prices, and the prices of index calls and index puts move together. The trading cost hypothesis reconciles the disparity found between the temporal relation in the stock index/index derivative markets versus the stock/stock option markets.

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.

Download or read book Empirical analysis of the Intraday Lead Lag Relationship between option and underlying stock market written by Giacomo Iacovelli and published by . This book was released on 2006 with total page 78 pages. Available in PDF, EPUB and Kindle. Book excerpt:

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.

Download or read book Dissertation Abstracts International written by and published by . This book was released on 1999 with total page 764 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book When Transactions Went High Tech a Cross Sectional Study of Equity Trading Costs in the Light of More Sophisticated Trading Systems written by Nikolaj Hesselholt Munck and published by . This book was released on 2014 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study aims at comparing the costs of trading at the larger European stock exchanges based on material computed by the Elkins/McSherry consultancy. We will evaluate the evolvement over time, and across exchanges.We find that it's essential to distinguish between the different components of the trading costs. As a consequence, we will break down the total costs into an explicit part and an implicit part, instead of looking at the total levels. The implicit part measures the indirect costs of the trade execution, that being the market impact. Whilst the explicit cost is the amount of fees plus other direct payable costs relating to the trade. Main reason for this is the fact that these components have dissimilar natures and thus different main drivers.Based on figures for the last 8 years we find that the cost levels have varied significantly both over time as well as among exchanges. Derived from both an empirical and a statistical analysis we find that the explicit cost levels have been declining significantly the last years with up to 35 percent. Hence, a drop that has caused the general costs to drop as well.Indications prove that the cost levels among exchanges have been clustering the last couple of years. Further analyses of the cost figures for 2004 indicate that the explicit costs of trading are approximately identical across the major European markets, when adjusting for extraordinary stamp duties on the buy side at the London Stock Exchange. The effect of this recent development leads us to conclude that firstly the levels have clustered around a common mean, and secondly that the general cost levels have declined.When examining the different cost drivers we identify the system turnover as a statistical significant explanatory variable for both the implicit and the explicit cost measure, thus for all three costs measures. A relationship that has not been pointed out in previous work. According to our results, one would expect both the implicit and explicit costs to depreciate as the system activity appreciates. These links serves as evidence of the fact that coalescing trading systems might imply lower future trading costs.

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.

Download or read book The Impact of Screen Trading on the Link between Stock Index and Stock Index Futures Prices written by Alex Frino and published by . This book was released on 2002 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we consider the impact of the introduction of LIFFE CONNECT on the lead-lag relationship between the FTSE100 index and its futures. In general, the results of this study suggest that the move to screen trading strengthens the simultaneity of price discovery in the cash and futures markets and lessens the existence of a lead-lag relationship. This evidence differs to that of the previous literature which has generally found a strengthening of the lead of the futures market to the cash market. The reason for this difference in results is most likely a reflection of the fact that the cash market was generally floor traded in the previous literature, while in this study the FTSE100 was screen traded.

Download or read book Information Trading and Product Market Interactions written by Heather Elise Tookes and published by . This book was released on 2003 with total page 592 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The nature of informed option trading Evidence from the takeover market written by Marco Klapper and published by Anchor Academic Publishing (aap_verlag). This book was released on 2014-02-01 with total page 70 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the kind of information ‘informed’ traders have prior to a takeover announcement using options of target firms and elaborates on the cross-sectional relationship between options and stocks around takeover announcements. Financial markets are driven by information and by individuals that generate, process, and disclose this information to the market. Naturally, there have to be individuals who possess more information about a firm or a future event than other market participants. Mergers and acquisitions are particularly interesting events in this regard because they can have significant implications for the firms and stakeholders involved, as well as for the competitive dynamics in the respective market. Because of the large potential price impact of such transactions, traders with private information about a prospective takeover are expected to trade on this information to make a profit. But who are these ‘informed traders’ and what kind of information do they possess? This study tries to give a respond to this question.

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:

Download or read book An Introduction to the Theory of Point Processes written by D.J. Daley and published by Springer Science & Business Media. This book was released on 2006-04-10 with total page 487 pages. Available in PDF, EPUB and Kindle. Book excerpt: Point processes and random measures find wide applicability in telecommunications, earthquakes, image analysis, spatial point patterns, and stereology, to name but a few areas. The authors have made a major reshaping of their work in their first edition of 1988 and now present their Introduction to the Theory of Point Processes in two volumes with sub-titles Elementary Theory and Models and General Theory and Structure. Volume One contains the introductory chapters from the first edition, together with an informal treatment of some of the later material intended to make it more accessible to readers primarily interested in models and applications. The main new material in this volume relates to marked point processes and to processes evolving in time, where the conditional intensity methodology provides a basis for model building, inference, and prediction. There are abundant examples whose purpose is both didactic and to illustrate further applications of the ideas and models that are the main substance of the text.

Download or read book Empirical Research on the German Capital Market written by Wolfgang Bühler and published by Springer Science & Business Media. This book was released on 1999-03-29 with total page 342 pages. Available in PDF, EPUB and Kindle. Book excerpt: This collection of fifteen original articles results from a cooperative intensive program of research on the German capital market. The program objectives included the development of expertise in modern empirical methods in financial economics and the derivation of results that might be specific to the German capital market. The four parts of the book are dedicated to: - problems of market structure and organization - information and capital market - risk and return - futures and options Altogether, the book gives an overview of empirical research on capital markets in Germany and helps to understand their nature. It also shows the application of modern techniques in financial research.

Download or read book Empirical Asset Pricing written by Turan G. Bali and published by John Wiley & Sons. This book was released on 2016-02-26 with total page 512 pages. Available in PDF, EPUB and Kindle. Book excerpt: “Bali, Engle, and Murray have produced a highly accessible introduction to the techniques and evidence of modern empirical asset pricing. This book should be read and absorbed by every serious student of the field, academic and professional.” Eugene Fama, Robert R. McCormick Distinguished Service Professor of Finance, University of Chicago and 2013 Nobel Laureate in Economic Sciences “The empirical analysis of the cross-section of stock returns is a monumental achievement of half a century of finance research. Both the established facts and the methods used to discover them have subtle complexities that can mislead casual observers and novice researchers. Bali, Engle, and Murray’s clear and careful guide to these issues provides a firm foundation for future discoveries.” John Campbell, Morton L. and Carole S. Olshan Professor of Economics, Harvard University “Bali, Engle, and Murray provide clear and accessible descriptions of many of the most important empirical techniques and results in asset pricing.” Kenneth R. French, Roth Family Distinguished Professor of Finance, Tuck School of Business, Dartmouth College “This exciting new book presents a thorough review of what we know about the cross-section of stock returns. Given its comprehensive nature, systematic approach, and easy-to-understand language, the book is a valuable resource for any introductory PhD class in empirical asset pricing.” Lubos Pastor, Charles P. McQuaid Professor of Finance, University of Chicago Empirical Asset Pricing: The Cross Section of Stock Returns is a comprehensive overview of the most important findings of empirical asset pricing research. The book begins with thorough expositions of the most prevalent econometric techniques with in-depth discussions of the implementation and interpretation of results illustrated through detailed examples. The second half of the book applies these techniques to demonstrate the most salient patterns observed in stock returns. The phenomena documented form the basis for a range of investment strategies as well as the foundations of contemporary empirical asset pricing research. Empirical Asset Pricing: The Cross Section of Stock Returns also includes: Discussions on the driving forces behind the patterns observed in the stock market An extensive set of results that serve as a reference for practitioners and academics alike Numerous references to both contemporary and foundational research articles Empirical Asset Pricing: The Cross Section of Stock Returns is an ideal textbook for graduate-level courses in asset pricing and portfolio management. The book is also an indispensable reference for researchers and practitioners in finance and economics. Turan G. Bali, PhD, is the Robert Parker Chair Professor of Finance in the McDonough School of Business at Georgetown University. The recipient of the 2014 Jack Treynor prize, he is the coauthor of Mathematical Methods for Finance: Tools for Asset and Risk Management, also published by Wiley. Robert F. Engle, PhD, is the Michael Armellino Professor of Finance in the Stern School of Business at New York University. He is the 2003 Nobel Laureate in Economic Sciences, Director of the New York University Stern Volatility Institute, and co-founding President of the Society for Financial Econometrics. Scott Murray, PhD, is an Assistant Professor in the Department of Finance in the J. Mack Robinson College of Business at Georgia State University. He is the recipient of the 2014 Jack Treynor prize.

Download or read book Limit Theorems for Stochastic Processes written by Jean Jacod and published by Springer Science & Business Media. This book was released on 2013-03-09 with total page 620 pages. Available in PDF, EPUB and Kindle. Book excerpt: Initially the theory of convergence in law of stochastic processes was developed quite independently from the theory of martingales, semimartingales and stochastic integrals. Apart from a few exceptions essentially concerning diffusion processes, it is only recently that the relation between the two theories has been thoroughly studied. The authors of this Grundlehren volume, two of the international leaders in the field, propose a systematic exposition of convergence in law for stochastic processes, from the point of view of semimartingale theory, with emphasis on results that are useful for mathematical theory and mathematical statistics. This leads them to develop in detail some particularly useful parts of the general theory of stochastic processes, such as martingale problems, and absolute continuity or contiguity results. The book contains an elementary introduction to the main topics: theory of martingales and stochastic integrales, Skorokhod topology, etc., as well as a large number of results which have never appeared in book form, and some entirely new results. It should be useful to the professional probabilist or mathematical statistician, and of interest also to graduate students.