Download or read book The Impact of Options Trading Activity on Firm Value written by and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis examines the impact of options trading activity on firm value for a sample of U.S. listed equities between 2004 and 2012. In doing so, it strongly relates to the paper "Options Trading Activity and Firm Valuation" by Roll et al. (2009) who examine the sample period 1996 to 2005. The hypothesis is that firms with higher options trading activity should have greater firm values. This claim is based on the intuition that options trading may play a role in completing markets and increase informational efficiency which, in turn, may improve resource allocation and increase firm values. Supporting the hypothesis, I find some evidence for a positive relationship between options trading activity and the firm value proxy (Tobin's Q). However, while this result is typically statistically significant, its economic meaningfulness is a concern as the coefficients for the options trading volume variable mostly imply a rather small absolute impact of options trading activity on firm value. Also, the robustness tests reveal a few limitations to the result, e.g., in terms of endogeneity bias.

Download or read book Options Trading Activity and Firm Valuation written by Eduardo S. Schwartz and published by . This book was released on 2008 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the effect of options trading volume on the value of the underlying firm after controlling for other variables that may affect firm value. The volume of options trading might have an effect on firm value because it helps to complete the market (allocational efficiency) and because the options market impounds information faster than the stock market (informational efficiency). We find that firms with more options trading have higher values. This result holds for all sample firms and for the subset of firms with positive options volume.

Download or read book Three Essays in Financial Markets The Bright Side of Financial Derivatives Options Trading and Firm Innovation written by Iván Blanco and published by Ed. Universidad de Cantabria. This book was released on 2019-02-15 with total page 90 pages. Available in PDF, EPUB and Kindle. Book excerpt: Do financial derivatives enhance or impede innovation? We aim to answer this question by examining the relationship between equity options markets and standard measures of firm innovation. Our baseline results show that firms with more options trading activity generate more patents and patent citations per dollar of R&D invested. We then investigate how more active options markets affect firms' innovation strategy. Our results suggest that firms with greater trading activity pursue a more creative, diverse and risky innovation strategy. We discuss potential underlying mechanisms and show that options appear to mitigate managerial career concerns that would induce managers to take actions that boost short-term performance measures. Finally, using several econometric specifications that try to account for the potential endogeneity of options trading, we argue that the positive effect of options trading on firm innovation is causal.

Download or read book Options Trading Activity and Firm Valuation written by Nicolas S. Fintzel and published by . This book was released on 2014 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Impact of Options Listing and Trading on the Cost of Debt Capital written by Mehdi khedmati and published by . This book was released on 2015 with total page 478 pages. Available in PDF, EPUB and Kindle. Book excerpt: The existing literature on options listing and trading volume has focused on the benefits of trading in options to shareholders only, arguing that stock options listing and subsequent trading volume improve the informational environment of equity market. While debt capital is a major part of firms' capital structure, the cost of debt capital implications of options listing and trading volume has been overlooked in the literature. Again, the extant literature shows that much of the benefits that shareholders might receive from options listing and trading volume stems from the informational advantage arising from increased trading by informed investors who possess private information in optioned firms compared to firms without listed options and increased activities of information intermediaries. This informational advantage should also benefit the lenders of the firms because options listing and trading volume facilitate access to more and higher quality information and also increase stock liquidity. Therefore, informational advantage of optioned firms should allow lenders to better assess the risk of default and facilitate more effective monitoring of debt agreements, which in return, lowers the rates of returns demanded by the lenders. Further, this informational advantage of options listing and options trading may be far more beneficial to lenders of young firms than old firms because young firms have shorter credit history in the market, thus, exposing their lenders to higher information asymmetry costs. This suggests that lenders could consider the age of borrowing firms as a risk factor when reacting to the informational advantages from options trading and deciding on the rate of return they demand on their lending. To empirically examine the above conjectures, I use three proxies of cost of debt capital comprising credit rating, interest rate on debt, and offering yield spread on new bond issues. My thesis documents the following main findings. First, the results show that all the three proxies used for cost of debt capital are negatively and statistically significantly associated with options listing. Second, the results from further tests on a restricted sample of firm-year observations with listed options show that all three proxies of cost of debt capital are negatively and statistically significantly associated with options trading volume. Third, the results of the analysis based on credit rating and interest rate proxies of cost of debt capital show that the reducing effect of options listing on the cost of debt capital gradually subsides over time, as firms accumulate a credit history in the capital market. Finally, the results of the analysis based on a restricted sample of firm-year observations with listed options and all three proxies of cost of debt capital show that that the reducing effect of options trading volume on the cost of debt capital gradually diminishes over time. The above results remain robust in most of the additional and robustness tests. My thesis contributes to the stream of literature that examines the effect of options listing and trading volume on the cost of capital by providing empirical evidence on the decreasing effect of options listing and options trading volume on the cost of debt capital. It also contributes to the extant literature on the determinants of the cost of debt capital by documenting that increased information quality stemming from options listing and trading volume is priced by lenders, i.e., they demand lower rate of return. Also, my thesis improves our understanding of the moderating influence of firm's age on the ex ante effect of information asymmetry and quality, proxied by options listing and trading volume, on the cost of debt capital. The findings of this thesis would inform firm managers that they may be able to access cheaper debt if they can influence options exchanges to select their firm for options listing, and also would be insightful for options exchanges so as to understand the critical implications their selection decisions may have in terms of influencing the firms' cost of debt capital.

Download or read book An Empirical Examination of Informed Trading in the Option Market written by Thi Thanh Van Le and published by . This book was released on 2012 with total page 376 pages. Available in PDF, EPUB and Kindle. Book excerpt: Despite a growing research interest in option trading and its impact on the pricing of the underlying asset, the role of options as a vehicle for informed trading remains an important economic question which has not yet been fully explored. In fact, even though academics have often argued that informed traders may prefer to trade in the option market rather than the equity market1, the question of whether (and to what extent) such a proposition would hold in practice has not been systematically addressed in the literature. This overarching research problem forms the foundation of this doctoral research project, leading to two important research questions. First, if investors do in fact use options to trade on information about underlying stock prices in practice, what implications does this have for the option (stock) pricing and forecasting? Second, what are the key factors driving traders' decisions to trade on new information in one market over another? These two issues correspond to the two gaps found in the extant literature on option trading, and also in the strand of empirical studies focusing on the role of options as a mechanism for trading on information about the underlying asset. To explore these research questions, three interrelated projects have been undertaken, each with a unique contribution to informing the research topic. These closely related investigations jointly provide consolidated answers to the two research questions raised previously. In response to the first research question, we pursue two strands of empirical investigation to examine the presence of informed trading in the option market. Firstly, we investigate the extent to which the information content extracted from options trading can be used to enhance predictions of the future volatility realised by underlying stocks. Secondly, we examine the price impact of information trading activities within the option market, focusing especially on the way in which the level of trading activities can explain and predict the future dynamics of the option implied volatility smile. Both of these strands yield evidence in support of information trading activities existing in the option market. Regarding the second research question, our collective evidence indicates that the allocation of informed traders between option and stock markets depends on the trade-off of transaction costs and trading opportunities existing in two related markets. This finding has consistently been corroborated by separate evidence emerging from our independent investigations. We found that the degree of information trading in the option market varies across different stocks, corresponding to variations in the level of individual stock liquidity. It has also been found that the degree of information asymmetry of option trades changed in response to changes in trading costs driven by regulatory changes observed during the 2008 short-sale ban. This research makes a valuable contribution to the field of option research. From the theoretical perspective, it addresses significant gaps in the existing literature and extends our understanding of informed trading activities in the option market. In particular, it contributes to the body of knowledge on the economic value of derivatives by investigating the critical role they have played in the process of incorporating new information into the market. From the practical perspective, it proposes a simple-yet-effective technique which employs trading volume to improve forecasts of the underlying stock volatility and of the option implied volatility (price) respectively. Since volatility plays such a central role in the practice of derivatives trading, risk analysis and portfolio management, better forecasts of these quantities are clearly important and highly regarded by practitioners. 1 Mainly due to higher financial leverages, reduced transactions costs and wider trading opportunities (eg speculation on volatility) (Black, 1975).

Download or read book Advances in Quantitative Analysis of Finance and Accounting New Series Vol 14 written by Cheng F. Lee and published by Center for PBBEFR & Airiti Press. This book was released on 2016-01-01 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Advances in Quantitative Analysis of Finance and Accounting (New Series) is an annual publication designed to disseminate developments in the quantitative analysis of finance and accounting. The publication is a forum for statistical and quantitative analyses of issues in finance and accounting as well as applications of quantitative methods to problems in financial management, financial accounting, and business management. The objective is to promote interaction between academic research in finance and accounting and applied research in the financial community and the accounting profession.

Download or read book Hedge Fund Activism written by Alon Brav and published by Now Publishers Inc. This book was released on 2010 with total page 76 pages. Available in PDF, EPUB and Kindle. Book excerpt: Hedge Fund Activism begins with a brief outline of the research literature and describes datasets on hedge fund activism.

Download or read book Follow the Smart Money written by Jon Najarian and published by . This book was released on 2018-10-29 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Options Markets written by John C. Cox and published by Prentice Hall. This book was released on 1985 with total page 518 pages. Available in PDF, EPUB and Kindle. Book excerpt: Includes the first published detailed description of option exchange operations, the first published treatment using only elementary mathematics and the first step-by-step procedure for implementing the Black-Scholes formula in actual trading.

Download or read book Liquidity Markets and Trading in Action written by Deniz Ozenbas and published by Springer Nature. This book was released on 2022 with total page 111 pages. Available in PDF, EPUB and Kindle. Book excerpt: This open access book addresses four standard business school subjects: microeconomics, macroeconomics, finance and information systems as they relate to trading, liquidity, and market structure. It provides a detailed examination of the impact of trading costs and other impediments of trading that the authors call rictions It also presents an interactive simulation model of equity market trading, TraderEx, that enables students to implement trading decisions in different market scenarios and structures. Addressing these topics shines a bright light on how a real-world financial market operates, and the simulation provides students with an experiential learning opportunity that is informative and fun. Each of the chapters is designed so that it can be used as a stand-alone module in an existing economics, finance, or information science course. Instructor resources such as discussion questions, Powerpoint slides and TraderEx exercises are available online.

Download or read book Introduction to Business written by Lawrence J. Gitman and published by . This book was released on 2024-09-16 with total page 1455 pages. Available in PDF, EPUB and Kindle. Book excerpt: Introduction to Business covers the scope and sequence of most introductory business courses. The book provides detailed explanations in the context of core themes such as customer satisfaction, ethics, entrepreneurship, global business, and managing change. Introduction to Business includes hundreds of current business examples from a range of industries and geographic locations, which feature a variety of individuals. The outcome is a balanced approach to the theory and application of business concepts, with attention to the knowledge and skills necessary for student success in this course and beyond. This is an adaptation of Introduction to Business by OpenStax. You can access the textbook as pdf for free at openstax.org. Minor editorial changes were made to ensure a better ebook reading experience. Textbook content produced by OpenStax is licensed under a Creative Commons Attribution 4.0 International License.

Download or read book Technical Analysis of the Financial Markets written by John J. Murphy and published by Penguin. This book was released on 1999-01-01 with total page 579 pages. Available in PDF, EPUB and Kindle. Book excerpt: John J. Murphy has updated his landmark bestseller Technical Analysis of the Futures Markets, to include all of the financial markets. This outstanding reference has already taught thousands of traders the concepts of technical analysis and their application in the futures and stock markets. Covering the latest developments in computer technology, technical tools, and indicators, the second edition features new material on candlestick charting, intermarket relationships, stocks and stock rotation, plus state-of-the-art examples and figures. From how to read charts to understanding indicators and the crucial role technical analysis plays in investing, readers gain a thorough and accessible overview of the field of technical analysis, with a special emphasis on futures markets. Revised and expanded for the demands of today's financial world, this book is essential reading for anyone interested in tracking and analyzing market behavior.

Download or read book FX Options and Smile Risk written by Antonio Castagna and published by John Wiley & Sons. This book was released on 2010-02-12 with total page 324 pages. Available in PDF, EPUB and Kindle. Book excerpt: The FX options market represents one of the most liquid and strongly competitive markets in the world, and features many technical subtleties that can seriously harm the uninformed and unaware trader. This book is a unique guide to running an FX options book from the market maker perspective. Striking a balance between mathematical rigour and market practice and written by experienced practitioner Antonio Castagna, the book shows readers how to correctly build an entire volatility surface from the market prices of the main structures. Starting with the basic conventions related to the main FX deals and the basic traded structures of FX options, the book gradually introduces the main tools to cope with the FX volatility risk. It then goes on to review the main concepts of option pricing theory and their application within a Black-Scholes economy and a stochastic volatility environment. The book also introduces models that can be implemented to price and manage FX options before examining the effects of volatility on the profits and losses arising from the hedging activity. Coverage includes: how the Black-Scholes model is used in professional trading activity the most suitable stochastic volatility models sources of profit and loss from the Delta and volatility hedging activity fundamental concepts of smile hedging major market approaches and variations of the Vanna-Volga method volatility-related Greeks in the Black-Scholes model pricing of plain vanilla options, digital options, barrier options and the less well known exotic options tools for monitoring the main risks of an FX options’ book The book is accompanied by a CD Rom featuring models in VBA, demonstrating many of the approaches described in the book.

Download or read book RISK MANAGEMENT THROUGH EQUITY DERIVATIVES written by DR. SHASHIBHUSHAN PALVE and published by Lulu.com. This book was released on 2016-01-22 with total page 182 pages. Available in PDF, EPUB and Kindle. Book excerpt: Derivatives are an innovation that has redefined the financial services industry and it has assumed a very important place in the capital markets. Financial derivative markets have enjoyed significant growth and innovation in the past few decades. Derivatives trading have become an important part of most modern financial markets. Initially financial derivatives were popular in only few developed countries but nowadays there is an extensive increase in their application in the developing counties like India.

Download or read book Valuation of Unlisted Direct Investment Equity written by Emmanuel O. Kumah and published by International Monetary Fund. This book was released on 2009-11-01 with total page 75 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the seven valuation methods for unlisted direct investment equity included in the recently adopted IMF Balance of Payments and International Investment Position Manual, Sixth Edition (BPM6). Based on publicly available Danish data, we test the three methods that are generally applicable and find that the choice of valuation method and estimation technique can have a highly significant impact on the international investment position, pointing to the need for further harmonization. The results show that the price-to-book value method generates more robust market value estimates than the price-to-earnings method. This finding suggests that the valuation basis for the forthcoming Coordinated Direct Investment Survey - own funds at book value -will provide useful information for compiling the international investment position.

Download or read book The Option Trader s Hedge Fund written by Dennis A. Chen and published by FT Press. This book was released on 2012-05-18 with total page 240 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this book, a hedge fund manager and an option trading coach show you how to earn steady, reliable income selling options by managing your option trades and running your option portfolio as a real business with consistent, steady returns. Packed with real-world examples, the authors show you how to manage your own “one man” hedge fund and make consistent profits from selling options by applying the basic framework and fundamental business model and principles of an “insurance company”. This framework helps you to apply your option trading strategy to a solid, predictable, business model with consistent returns. For someone who has some knowledge of trading options and wants to become a consistent income earner. The authors provide a complete “operations manual” for setting up your business. Gain pearls of wisdom from both a professional options trader and coach, and from a hedge fund manager focused on managing an options based portfolio.