This paper considers the dynamics of spot and futures prices in the presence of arbitrage. A partially linear error correction model is proposed where the adjustment coefficient is allowed to depend non-linearly on the lagged price difference. The model is estimated using data on the DAX index...

Using local linear regressions based on Russell index reconstitution, we examine how option price efficiency is affected by stock market indexing. We find that put-call parity deviation, a proxy for options price efficiency, is significantly smaller if a stock is at the top of the Russell 2000...

The aim of this paper is twofold: to investigate how the information content of implied volatility varies according to moneyness and option type and to compare option-based forecasts with historical volatility. The different information content of implied volatility is examined for the most...

Recent advances in natural language processing have contributed to the development of market sentiment measures through text content analysis in news providers and social media. The effectiveness of these sentiment variables depends on the implemented techniques and the type of source on which...

The recent financial crisis renewed concerns about a possible destabilizing impact of derivatives trading. Despite a very active research, the question whether or not derivatives tend to destabilize financial markets has not yet been answered to satisfaction. This contribution aims to revise the...

We find that the demand for stock options that increases exposure to the underlying is positively related to the individual investor sentiments and past market returns, whereas the demand for index options is invariant to these factors. These differences in trading patterns are also reflected in...

This paper investigates the lead-lag relationship in daily returns and volatilities between price movements of FTSE/ASE-20 futures and the underlying FTSE/ASE-20 cash index of the Athens Stock Exchange. The results suggest that there is a bidirectional causality between spot and futures returns,...

Trades in DAX index options with identical maturities cluster around particular classes of strike prices. For example, options with strikes ending on 50 are less traded than options with strikes ending on 00. Clustering is higher when options with close strike prices are good substitutes. The...