We study how equity option trading affects the market risk premium. We find that a measure of aggregate call order imbalance (ACIB), defined as the cross-sectional average of the difference between open-buy and open-sell volume, negatively forecasts future stock market returns significantly from...

The replication of any European contingent claim by a static portfolio of calls and puts with strikes forming a continuum, formally proven by Carr and Madan (1998), extends to "standard dispersion" options written on the Euclidean norm of a vector of n asset performances. With the help of...

We document both theoretically and empirically a major dependence in both the Information Shares (IS) and Component Shares (CS) approaches to the estimation of the price discovery metrics on the errors arising out of the inversion method of the option value to find the implied stock price. We...

This paper examines how options traders trade daily stock market mispricing measured by short-term past return and put-call option volatility spread. Anomaly return is 7.31 basis points per day when customer option traders trade along with the anomaly signal and is insignificant when they trade...

We provide an easy-to-use model that values derivatives for a privately informed agent. We introduce private forward prices that conveniently format private information for inclusion in a standard no-arbitrage framework. This framework yields simple expressions for the privately-informed value...

Since the collapse of the Metallgesellschaft AG due to hedging losses in 1993, energy practitioners have been concerned with the ability to hedge long-dated linear and non-linear oil liabilities with short-dated futures and options. This paper identifies a model-free non-parametric approach to...

This paper aims to provide the necessity to activate long-term exchange-traded derivatives (ETD) in Korea. In the era of aging, low interest rates and low economic growth, the investment demand for long-term financial products, and its hedging demand have steadily increased. Unfortunately,...

This paper introduces a new model-free approach to measuring the expectation of market variance using VIX derivatives. This approach shows that VIX derivatives carry different information about future variance than S&P 500 (SPX) options, especially during the 2008 financial crisis. I find that...

We analyze how informed investors trade in the options market ahead of corporate news when they receive private, but noisy, information about the timing and impact of these announcements on stock prices. We propose a framework that ranks options trading strategies (option type, maturity, and...