Volatility Trading and Derivatives Markets
Type de matériel :
TexteLangue : français Détails de publication : 2003.
Ressources en ligne : Abrégé : This article investigates the implications of volatility trading on the behavior of informed traders. The major finding is that volatility traders evict directional traders from the options market. Indeed, we provide conditions under which informed-volatility trades have a positive impact on options bid-ask spread so that informed-directional traders choose the spot market. While these results do not confirm that option returns lead spot returns, they are consistent with previous empirical findings.Classification JEL: C32, G12, G14.
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This article investigates the implications of volatility trading on the behavior of informed traders. The major finding is that volatility traders evict directional traders from the options market. Indeed, we provide conditions under which informed-volatility trades have a positive impact on options bid-ask spread so that informed-directional traders choose the spot market. While these results do not confirm that option returns lead spot returns, they are consistent with previous empirical findings.Classification JEL: C32, G12, G14.
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