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We analyze American put options in a hyper-exponential jump-diffusion model. Our contribution is threefold. Firstly, by following a maturity randomization approach, we solve the partial integro-differential equation and obtain a tight lower bound for the American option price. Secondly, our...
Persistent link: https://www.econbiz.de/10011293508
We develop statistical methods to detect informed trading in options markets. We apply these methods to 31 companies from various sectors over 14 years analyzing approximately 9.6 million option prices. We find that option informed trading tends to cluster prior to certain events, takes place...
Persistent link: https://www.econbiz.de/10009314008
This appendix extends the empirical results in Chesney, Crameri, and Mancini (2011). Informed trading activities on put and call options are analyzed for 19 companies in the banking and insurance sectors from January 1996 to September 2009. Our empirical findings suggest that certain events such...
Persistent link: https://www.econbiz.de/10009314012
Supported by empirical examples, this paper provides a theoretical analysis on the impacts of using a suboptimal information set for the estimation of the empirical pricing kernel and, more in general, for the validity of the fundamental theorems of asset pricing. While inferring the...
Persistent link: https://www.econbiz.de/10011506352
Prediction (or information) markets are markets where participants trade contracts whose payoff depends on unknown future events. Studying prediction markets allows to avoid many problems, which arise in some artificially designed behavioral experiments investigating collective decision making...
Persistent link: https://www.econbiz.de/10009295796
We show that options written on stocks with low prices are over-priced. This effect is robust to a variety of tests, controlling for common stock- and option- risk characteristics, and to reasonable transaction costs. Natural experiments corroborate this finding; options tend to become...
Persistent link: https://www.econbiz.de/10012271181
Hedge funds significantly reduced their equity holdings during the recent financial crisis. In 2008Q3-Q4, hedge funds sold about 29% of their aggregate portfolio. Redemptions and margin calls were the primary drivers of selloffs. Consistent with forced deleveraging, the selloffs took place in...
Persistent link: https://www.econbiz.de/10009009543
We introduce a new measure of activity of financial markets that provides a direct access to their level of endogeneity. This measure quantifies how much of price changes are due to endogenous feedback processes, as opposed to exogenous news. For this, we calibrate the self-excited conditional...
Persistent link: https://www.econbiz.de/10009561617
During the COVID-19 market crash, U.S. stocks with higher institutional ownership -- in particular, those held more by active, short-term, and more exposed institutions -- performed worse. Portfolio changes through the first quarter of 2020 reveal that institutional investors prioritized...
Persistent link: https://www.econbiz.de/10012271074
Market reactions to the 2019 novel coronavirus disease (COVID-19) provide new insights into how real shocks and financial policies drive firm value. Initially, internationally oriented firms, especially those more exposed to trade with China, underperformed. As the virus spread to Europe and the...
Persistent link: https://www.econbiz.de/10012181338