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The Intraday Behavior Of Bid Ask Spreads Returns And Volatility For Ftse 100 Stock Index Options
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Book Synopsis The Intraday Behavior of Bid-Ask Spreads, Returns, and Volatility for Ftse-100 Stock Index Options by : Owain Ap Gwilym
Download or read book The Intraday Behavior of Bid-Ask Spreads, Returns, and Volatility for Ftse-100 Stock Index Options written by Owain Ap Gwilym and published by . This book was released on 1997 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The microstructure of stock markets and futures markets has attracted considerable recent attention, but the evidence relating to options markets is sparse, especially for the U.K. This article addresses this void in the literature by presenting evidence on the intraday behavior of bid-ask spreads, returns, volatility, and volume. Both clear differences and similarities are found with the previous results for other markets. Spreads are found to be wide near the market open and narrow near the close. Although this contrasts with some previous evidence in U.S. stock and futures markets of a U-shaped pattern in intraday spreads, it is consistent with other recent research, and the differences may be explained by differing market structures. No clear pattern emerges in options returns, but there is a U-shape across the day in returns volatility and in volume. The results help to differentiate between the competing theories of the intraday behavior of these key variables.
Book Synopsis The Intraday Behavior of Bid-Ask Spreads for NYSE Stocks and Cboe Options by : Kalok Chan
Download or read book The Intraday Behavior of Bid-Ask Spreads for NYSE Stocks and Cboe Options written by Kalok Chan and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the intraday behavior of bid-ask spreads for actively traded CBOE options and for their NYSE-traded underlying stocks. We confirm previous findings that stocks have a U-shaped spread pattern; however, the options display a very different intraday pattern--one that declines sharply after the open, and then levels off. Our results suggest that both the degree of competition in market making and the extent of informed trading are important for understanding the intraday behavior of spreads.
Book Synopsis The Intraday Behaviour of Bid-Ask Spreads, Trading Volume and Return Volatility by : Syed Mujahid Hussain
Download or read book The Intraday Behaviour of Bid-Ask Spreads, Trading Volume and Return Volatility written by Syed Mujahid Hussain and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper undertakes a fresh empirical investigation of key financial market variables and the theories that link them. We employ high frequency 5-minute data that include transaction price, trading volume, and the close bid and ask quote for the period May 5, 2004 through September 29, 2005. We document a number of regularities in the pattern of intraday return volatility, trading volume and bid-ask spreads. We are able to confirm the reverse J-shaped pattern of intraday bid-ask spreads with the exception of a major bump following the intraday auction at 13:05 CET. The aggregate trading volume exhibits L-shaped pattern for the German blue chip index, while German index volatility displays a somewhat reverse J-shaped pattern with two major bumps at 14:30 and 15:30 CET. Our empirical findings show that contemporaneous and lagged trading volume and bid-ask spreads have numerically small but statistically significant effect on return volatility. Our results also indicate asymmetry in the effects of volume on conditional volatility. However, inclusion of both measures as proxy for informal arrival in the conditional volatility equation does not explain the well known volatility persistence in intraday stock returns.
Book Synopsis The Intraday Behaviour of Quoted and Effective Bid-Ask Spreads of Ft-Se 100 Index Options by : Paul Dawson
Download or read book The Intraday Behaviour of Quoted and Effective Bid-Ask Spreads of Ft-Se 100 Index Options written by Paul Dawson and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study compares the intraday patterns observed in the quoted and effective bid-ask spreads on the FT-SE 100 index options traded on LIFFE with a broad range of theoretical models. Several discrepancies are found. It is argued that these arise principally because the standard classification of investors into informed and liquidity traders breaks down in the case of index options, in part, because options are inappropriate instruments for liquidity traders, and also because the concept of an informed trader has a rather different nature in the case of an index as contrasted with an individual stock. Furthermore, marketmakers in these options have access to a liquid instrument to hedge the risk of asymmetric information. The key empirical finding is that there is a significant contraction of both the quoted and effective bid-ask spreads after the first 25 minutes of the trading day. Subsequently, there is little systematic intraday change in either kind of spread. This contraction is only partially consistent with theory. This study finds a widening only at the beginning of the day, and no evidence of informed trading is found during the opening interval. Is there an optimum time during the course of the day for investors to buy and sell options? The conclusion reached is that there is no such optimum time, but that investors should avoid the opening period of the day, since both the quoted and effective spreads are significantly larger than those at other times, with no compensating reward in the form of more informative prices.
Download or read book Life Cycles written by Abhay Abhyankar and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper uses a data set consisting of a complete history of all transactions and quotes to examine intraday patterns in trading volume, volatility and the quoted bid-ask spread in the market for FTSE-100 index futures. We also document a number of regularities in the pattern of daily returns and volatility of the cash index. Finally, we document intraday patterns in the basis, i.e. the contemporaneous difference between the futures price and the underlying cash index level. In general, we find returns vary somewhat over the day, reflecting in particular the influence of the US market openings in early afternoon London-time. We find that, while both volume and volatility exhibit a U-shaped pattern over the day, movements in the spread tend if anything to follow the opposite pattern. As far as consistency with the best-known microstructure models is concerned, our results are more supportive of the Brock and Kleidon (1992) market closures model than the Admati and Pfleiderer (1988) noise- trading model.
Book Synopsis Intraday Trading Patterns and Day-of-the-Week in Stock Index Options Markets by : Min-Hsien Chiang
Download or read book Intraday Trading Patterns and Day-of-the-Week in Stock Index Options Markets written by Min-Hsien Chiang and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This article studies the intraday patterns of trading volume, volatility, and spreads and day-of-the-week variations for stock index options traded on the Taiwan Futures Exchange (TAIFEX). In addition, we examine the overnight variations in returns, volatility and spreads as well. We find that trading volume of TAIFEX options exhibit a U-shaped pattern. While the volatility at the market open is extremely volatile, the volatility quickly levels off for much of the rest of a trading. The bid-ask spreads pattern for TAIFEX options approximately follows a U-shaped pattern with a small hump immediately after 13:00 hours. The mean returns at Monday open for TAIFEX calls are lower while returns at the end of a trading day are larger. Calls have smaller overnight variations in volatility and bid-ask spreads compared to those in puts.
Book Synopsis Bid-Ask Spreads, Trading Activity, and Trading Hours by : Abhay Abhyankar
Download or read book Bid-Ask Spreads, Trading Activity, and Trading Hours written by Abhay Abhyankar and published by . This book was released on 1999 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the intra-day pattern of bid-ask spreads, volatility, and volume on the London Stock Exchange. The primary focus of the study is to relate the empirically observed regularities to specific institutional features of the trading system on the Exchange. We also examine the robustness of the results with reference to changes in the trading hours. The data set used consists of quote and transactions data for about 147 stocks and 835 stocks during two quarters of 1990 and 1991. We test for statistical significance of the average inside spread, the volume, and the return volatility during 15-minute intervals using a GMM ( Generalized Method of Moments ) procedure which is robust to both serial correlation and heteroscedasticity. We also indicate graphically the intra-daily patterns in the inside spread, the trading volume, the number of transactions, and the return volatility. Our results suggest that the bid-ask spread is widest outside the Mandatory Quote Period (MQP), i.e. the period during which market-makers are obliged to post firm quotes. The spread narrows slightly over the trading day for highly traded stocks but is almost constant for less liquid stocks. The spread again widens from the end of the MQP till the close of the SEAQ system. We conjecture that the periods prior to and after the MQP provide quot;windowsquot; for price discovery prior to the MQP and for quot;cooling offquot; after the MQP. Trading volume for the entire sample shows a two-humped shape. However, a crude U-shaped pattern is seen for stocks in the highest trading decile based on volume and number of transactions. Volatility, based on the mid-point of the inside spread, also shows a U-shaped pattern. The higher volatility outside the MQP coincides with the greater price uncertainty prevailing during these time periods.
Book Synopsis Return Volatility Movements in Spot and Futures Markets by : Jeng-Hong Chen
Download or read book Return Volatility Movements in Spot and Futures Markets written by Jeng-Hong Chen and published by . This book was released on 2014 with total page 14 pages. Available in PDF, EPUB and Kindle. Book excerpt: After the Debt Ceiling Bill was passed on August 2, 2011, the S&P 500 index returns volatility increased significantly until the end of 2011. This research investigates the return volatility movements in S&P 500 spot index and index futures markets, the lead/lag relationship between two markets, and the effect of volatility on the trading costs using year 2011 intraday data. The analyses of intraday data show the following results during the higher volatility period (8/3/2011-12/30/2011): First, the difference of return variances between index futures and spot index is even greater than that during the lower volatility period. Second, the index futures market leads the spot index market and the interaction between both markets becomes stronger. Third, both index futures and spot index exhibit clearer U-shape intraday pattern of return volatilities. Finally, the trading costs, measured by the bid-ask spreads, are significantly larger.
Book Synopsis Contemporary Issues in Financial Institutions and Markets by : John Wilson
Download or read book Contemporary Issues in Financial Institutions and Markets written by John Wilson and published by Routledge. This book was released on 2015-07-16 with total page 150 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book brings together academic work on contemporary issues in financial institutions and markets. The general theme is designed to allow for a wide range of topics, covering the diverse nature of academic enquiry in banking and finance. The contributions thus address a broad spectrum of contemporary issues including bank diversification and securitization activities; bank regulatory reforms and competition; the performance of mutual funds and alternative asset classes; role of liquidity in price discovery for credit derivatives; and the existence of the compass rose pattern within option contracts market. This book was originally published as a special issue of The European Journal of Finance.
Book Synopsis Bid-ask Spreads, Trading Volume and Volatility by :
Download or read book Bid-ask Spreads, Trading Volume and Volatility written by and published by . This book was released on 1995 with total page 16 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Financial Markets: Derivative and foreign exchange markets by : Jeff Madura
Download or read book Financial Markets: Derivative and foreign exchange markets written by Jeff Madura and published by . This book was released on 2004 with total page 312 pages. Available in PDF, EPUB and Kindle. Book excerpt: Illustrates the progress that has been made in financial markets and assesses innovations that provide solutions to dilemmas and increase efficiency. These articles break down the complex web of relationships between the financial intermediary, the managers of corporations, shareholders, creditors, analysts and regulators.
Book Synopsis The Journal of Computational Finance by :
Download or read book The Journal of Computational Finance written by and published by . This book was released on 2000 with total page 1046 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Information Content of Iron Butterfly Arbitrage Bounds by : Mucahit Kochan
Download or read book Information Content of Iron Butterfly Arbitrage Bounds written by Mucahit Kochan and published by . This book was released on 2016 with total page 92 pages. Available in PDF, EPUB and Kindle. Book excerpt: Informed traders trade options on underlying securities to lower transaction costs and increase financial leverage for price trend and variance strategies. Options markets play a significant role in price discovery by incorporating private information about future prices for an underlying security into option prices. I generate a new model-free volatility measure to calculate the "distance from arbitrage bounds" from minute-by-minute option series for the S&P 500 index and 30 individual underlying stocks. These iron butterfly arbitrage bounds (IBBs) use intraday call and put option prices from the Bloomberg database. Narrow and wide IBBs are expected to reveal the options market valuation of volatility by market participants. Data series is gathered by using successive one-minute intervals from the Bloomberg database. The data comprise the most recent bid and ask option prices and volumes. I collect S&P 500 index values and index options and use 30 underlying stock prices and option prices for the contracts that have the largest option trading volume during the sampling interval. These bid and ask prices reflect the information generated by intraday price pressures implied by S&P 500 index options or stock options. Consistent with the option micro-structure literature, I find that the IBB measure for actively traded stock options attains its highest level immediately after the open of the market, declines steadily throughout the first trading hour and remains relatively stable until market close. However, index IBBs behave differently. S&P 500 index option IBB attains its lowest level during the first hour of the trading day, then increases and remains relatively stable until market close. I present new evidence regarding the dynamic relation between stock returns and innovations in expected volatility by using the minute-by-minute change in implied volatility (IV) as a proxy. Unlike the relationship between individual stock returns and their respective changes in implied idiosyncratic volatility, I find that all the coefficients on the market volatility index (VIX) term are negative and significant. Therefore, the evidence supports the explanation that the negative relationship between stock returns and expected volatility innovations is primarily related to the systematic component of the expected volatility. I also test whether narrow and wide IBB values capture incremental information to explain the return-volatility relationship. Results indicate that neither narrow IBB nor wide IBB values provide additional information beyond that provided by VIX and IV. The results are robust to five-minute and ten-minute sampling frequencies.
Book Synopsis An Intraday Analysis of Liquidity and Price Volatility in the S&P 500 Index Futures Market by : George H. K. Wang
Download or read book An Intraday Analysis of Liquidity and Price Volatility in the S&P 500 Index Futures Market written by George H. K. Wang and published by . This book was released on 1990 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Market Maker Price Discrimination by : Walter Hugo Prahl
Download or read book Market Maker Price Discrimination written by Walter Hugo Prahl and published by . This book was released on 1994 with total page 316 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Carbon Markets written by Gbenga Ibikunle and published by Springer. This book was released on 2018-02-26 with total page 243 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book explores the microstructure of carbon markets and the pricing of carbon financial instruments generally. It provides a critical microstructure analysis of the EU Emissions Trading Scheme (EU-ETS), and also examines the theoretical and related market design issues affecting emissions trading schemes. Individual chapters analyse how intraday pricing evolves in carbon markets, the price impact of block trades in carbon financial instruments and their determinants, short and long-term liquidity effects in carbon markets, and the links between carbon market liquidity and efficiency. The aforementioned issues are explored using case studies of two major trading platforms operating within the EU-ETS. The book concludes by focusing on future policy and regulatory challenges in carbon markets, especially with respect to addressing pricing volatility challenges.
Book Synopsis Information, Trading and Stock Returns by : K. C. Chan
Download or read book Information, Trading and Stock Returns written by K. C. Chan and published by . This book was released on 1994 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper compares the intra-day patterns on the NYSE and AMEX of volatility, trading volume and bid-ask spreads for European dually- listed stocks, Japanese dually-listed stocks also listed in London, and Japanese dually-listed stocks not listed in London with American stocks of comparable average trading volume and volatility. It is shown that the intra-day patterns for these stocks are remarkably similar even though the public information flows differ markedly across these stocks during the trading day. In the morning, Japanese stocks have the greatest volatility and volume, followed by European stocks and American stocks. These rankings are reversed in the afternoon. We argue that these patterns are consistent with markets reacting to the overnight accumulation of public information which is greatest for Japanese stock and smallest for American stocks and inconsistent with the view that early morning volatility can be attributed to monopolistic specialist behavior.
