Pub Date : 2018-04-18DOI: 10.1007/s11147-018-9143-0
Robert Jarrow, Scott Fung, Shih-Chuan Tsai
Using account-level transaction data in options and futures markets, we investigate the existence of market manipulation, which is the ability of large traders to trade strategically, impacting prices and making abnormal profits. First, large trader’s option positions have a quantity impact on the underlying asset’s price. Second, large traders generate significantly positive alphas from trading options and futures. Among the different investor types, proprietary dealers generate the largest positive alphas. Third, these abnormal returns are consistent with strategic trading and cross-market manipulation. The evidence supports market manipulation across the options and futures markets, but not within the futures market itself.
{"title":"An empirical investigation of large trader market manipulation in derivatives markets","authors":"Robert Jarrow, Scott Fung, Shih-Chuan Tsai","doi":"10.1007/s11147-018-9143-0","DOIUrl":"https://doi.org/10.1007/s11147-018-9143-0","url":null,"abstract":"Using account-level transaction data in options and futures markets, we investigate the existence of market manipulation, which is the ability of large traders to trade strategically, impacting prices and making abnormal profits. First, large trader’s option positions have a quantity impact on the underlying asset’s price. Second, large traders generate significantly positive alphas from trading options and futures. Among the different investor types, proprietary dealers generate the largest positive alphas. Third, these abnormal returns are consistent with strategic trading and cross-market manipulation. The evidence supports market manipulation across the options and futures markets, but not within the futures market itself.","PeriodicalId":45022,"journal":{"name":"Review of Derivatives Research","volume":"5 ","pages":""},"PeriodicalIF":0.8,"publicationDate":"2018-04-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138524742","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2018-02-20DOI: 10.1007/s11147-018-9142-1
Yu‐Sheng Lai
{"title":"Dynamic hedging with futures: a copula-based GARCH model with high-frequency data","authors":"Yu‐Sheng Lai","doi":"10.1007/s11147-018-9142-1","DOIUrl":"https://doi.org/10.1007/s11147-018-9142-1","url":null,"abstract":"","PeriodicalId":45022,"journal":{"name":"Review of Derivatives Research","volume":"21 1","pages":"307 - 329"},"PeriodicalIF":0.8,"publicationDate":"2018-02-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1007/s11147-018-9142-1","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"52907729","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2017-12-26DOI: 10.1007/s11147-017-9141-7
Matthias R. Fengler, A. Melnikov
{"title":"GARCH option pricing models with Meixner innovations","authors":"Matthias R. Fengler, A. Melnikov","doi":"10.1007/s11147-017-9141-7","DOIUrl":"https://doi.org/10.1007/s11147-017-9141-7","url":null,"abstract":"","PeriodicalId":45022,"journal":{"name":"Review of Derivatives Research","volume":"21 1","pages":"277 - 305"},"PeriodicalIF":0.8,"publicationDate":"2017-12-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1007/s11147-017-9141-7","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"52907607","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
A new method to retrieve the risk-neutral probability measure from observed option prices is developed and a closed form pricing formula for European options is obtained by employing a modified Gram–Charlier series expansion, known as the Gauss–Hermite expansion. This expansion converges for fat-tailed distributions commonly encountered in the study of financial returns. The expansion coefficients can be calibrated from observed option prices and can also be computed, for example, in models with the probability density function or the characteristic function known in closed form. We investigate the properties of the new option pricing model by calibrating it to both real-world and simulated option prices and find that the resulting implied volatility curves provide an accurate approximation for a wide range of strike prices. Based on an extensive empirical study, we conclude that the new approximation method outperforms other methods both in-sample and out-of-sample.
{"title":"A general closed form option pricing formula","authors":"C. Necula, Gabriel G. Drimus, W. Farkas","doi":"10.2139/ssrn.2210359","DOIUrl":"https://doi.org/10.2139/ssrn.2210359","url":null,"abstract":"A new method to retrieve the risk-neutral probability measure from observed option prices is developed and a closed form pricing formula for European options is obtained by employing a modified Gram–Charlier series expansion, known as the Gauss–Hermite expansion. This expansion converges for fat-tailed distributions commonly encountered in the study of financial returns. The expansion coefficients can be calibrated from observed option prices and can also be computed, for example, in models with the probability density function or the characteristic function known in closed form. We investigate the properties of the new option pricing model by calibrating it to both real-world and simulated option prices and find that the resulting implied volatility curves provide an accurate approximation for a wide range of strike prices. Based on an extensive empirical study, we conclude that the new approximation method outperforms other methods both in-sample and out-of-sample.","PeriodicalId":45022,"journal":{"name":"Review of Derivatives Research","volume":"22 1","pages":"1-40"},"PeriodicalIF":0.8,"publicationDate":"2017-10-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.2139/ssrn.2210359","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48777028","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2017-09-25DOI: 10.1007/s11147-017-9139-1
P. Hieber
{"title":"Pricing exotic options in a regime switching economy: a Fourier transform method","authors":"P. Hieber","doi":"10.1007/s11147-017-9139-1","DOIUrl":"https://doi.org/10.1007/s11147-017-9139-1","url":null,"abstract":"","PeriodicalId":45022,"journal":{"name":"Review of Derivatives Research","volume":"21 1","pages":"231 - 252"},"PeriodicalIF":0.8,"publicationDate":"2017-09-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1007/s11147-017-9139-1","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49488967","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2017-08-18DOI: 10.1007/s11147-017-9138-2
Sergio Albeverio, Victoria Steblovskaya, Kai Wallbaum
Designing a structured investment product with capital protection which would be characterized by high capital protection level as well as high equity participation rate is a challenging task in the current market environment. Low interest rates and high volatility levels negatively affect the above key parameters of such investment products. One way to increase the participation rate of a structured investment product with a fixed capital protection level is to use a volatility target (VolTarget) strategy as an underlying asset for a financial option embedded in such a product. We introduce an extended VolTarget mechanism with interest rate dependent volatility target levels and provide a detailed comparative numerical study of European options linked to VolTarget strategies within a hybrid Heston–Vasičec model with stochastic volatility and stochastic interest rate.
在当前的市场环境下，设计一种既具有高保本水平又具有高参股率的保本结构性投资产品是一项具有挑战性的任务。低利率和高波动水平对此类投资产品的上述关键参数产生负面影响。提高具有固定资本保护水平的结构性投资产品参与率的一种方法是使用波动性目标(VolTarget)策略作为嵌入此类产品的金融期权的基础资产。我们引入了一个具有利率依赖波动率目标水平的扩展VolTarget机制，并在具有随机波动率和随机利率的混合heston - vasi ec模型中对与VolTarget策略相关的欧洲期权进行了详细的比较数值研究。
{"title":"The volatility target effect in structured investment products with capital protection","authors":"Sergio Albeverio, Victoria Steblovskaya, Kai Wallbaum","doi":"10.1007/s11147-017-9138-2","DOIUrl":"https://doi.org/10.1007/s11147-017-9138-2","url":null,"abstract":"Designing a structured investment product with capital protection which would be characterized by high capital protection level as well as high equity participation rate is a challenging task in the current market environment. Low interest rates and high volatility levels negatively affect the above key parameters of such investment products. One way to increase the participation rate of a structured investment product with a fixed capital protection level is to use a volatility target (VolTarget) strategy as an underlying asset for a financial option embedded in such a product. We introduce an extended VolTarget mechanism with interest rate dependent volatility target levels and provide a detailed comparative numerical study of European options linked to VolTarget strategies within a hybrid Heston–Vasičec model with stochastic volatility and stochastic interest rate.","PeriodicalId":45022,"journal":{"name":"Review of Derivatives Research","volume":"68 3","pages":""},"PeriodicalIF":0.8,"publicationDate":"2017-08-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138524775","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2017-07-20DOI: 10.1007/s11147-017-9137-3
J. Gerer, G. Dorfleitner
{"title":"Optimal discrete hedging of American options using an integrated approach to options with complex embedded decisions","authors":"J. Gerer, G. Dorfleitner","doi":"10.1007/s11147-017-9137-3","DOIUrl":"https://doi.org/10.1007/s11147-017-9137-3","url":null,"abstract":"","PeriodicalId":45022,"journal":{"name":"Review of Derivatives Research","volume":"21 1","pages":"175 - 199"},"PeriodicalIF":0.8,"publicationDate":"2017-07-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1007/s11147-017-9137-3","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44549502","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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