This paper examines the effects that pricing errors in the underlying asset have on options prices, their Greeks, and their implied risk neutral densities. Pricing errors can be viewed as a random proportional transaction cost. When pricing errors are information-unrelated, options prices are...

We explore whether there is informed trading, which takes advantage of data breach events. By analyzing transactions in the options market, we conjecture that there are two distinct informed trading patterns that likely begin approximately three months and nine months prior to corporate...

For a Lévy process corrupted with microstructure noise, I derive the sampling distributions for the information-related and information-unrelated pricing error parameters and for the variance of latent true price returns (a noise-robust and consistent estimator of realized variance). The test...

The classical practice in exchange rate model estimation is to use bilateral differentials of macro fundamentals. Empirically, capitals may not place equal importance on the economic fundamentals among all countries. Therefore, allowing each country’s variable to enter the model independently...

We apply 24-hour variance ratio methodology to examine dealers’ behavior and pricing process in corporate bond markets. We find that corporate bond dealers exert significant market power deviating bond prices from their equilibrium. Dealers extract greater rents at the market open than at the...

Jumps and cojumps are examined in the covariance matrices of high-frequency financial markets. We propose a new method for identifying intraday volatility jumps in the diffusive covariance matrix of asset pairs. Our method avoids model misspecification errors, is able to identify multiple...