Journal ArticleDOI
Stock price clustering on option expiration dates
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TLDR
This article showed that on expiration dates, the closing prices of stocks with listed options cluster at option strike prices, and provided evidence that hedge rebalancing by option market makers and stock price manipulation by firm proprietary traders contribute to the clustering.About:
This article is published in Journal of Financial Economics.The article was published on 2005-10-01. It has received 126 citations till now. The article focuses on the topics: Hedge (finance) & Order (exchange).read more
Citations
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Option Market Activity
TL;DR: The authors used a unique option data set to provide detailed descriptive statistics on the purchased and written open interest and open buy and sell volume of several classes of investors, and found that volatility trading through straddles and strangles accounts for a small fraction of option trading volume and that a large percentage of call writing is part of covered call positions.
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Exchange trading rules and stock market liquidity.
TL;DR: In this article, the authors examine stock exchange trading rules for market manipulation, insider trading, and broker-agent conflict, across countries and over time, in 42 stock exchanges around the world.
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Does Option Trading Convey Stock Price Information
TL;DR: In this article, the authors decompose total order imbalance in stock transactions into the imbalance induced by option transactions and the imbalance generated by stock transactions independent of option trading activities, and they find that the stock exposure imbalance induced from option transactions has strong predictive power of stock returns that does not reverse at long horizons.
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Contingent Capital with a Dual Price Trigger
TL;DR: In this article, the authors propose a form of contingent capital for financial institutions that converts from debt to equity if two conditions are met: the financial institution stock price is at or below a trigger value and the value of a financial institution index is also at a or below the trigger value.
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Measuring Closing Price Manipulation
TL;DR: In this paper, the authors quantify the effects of closing price manipulation on trading characteristics and stock price accuracy using a unique sample of prosecuted manipulation cases and construct an index of the probability and intensity of closed price manipulation.
References
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Options, Futures, and Other Derivatives
TL;DR: The Black-Scholes analysis of stock option prices was used in this paper to model the behavior of stock prices and the Yield Curve of stock options, as well as the Black's model for option pricing.
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Stock Price Clustering and Discreteness
TL;DR: In this paper, an econometric model of stock price clustering was derived and estimated, and it was shown that traders would frequently use odd sixteenths when trading low-price stocks, if exchange regulations permitted trading on sixteenth's.
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The Price Effect of Option Introduction
TL;DR: This article examined the price effect of option introduction from 1974 to 1980 and found that the introduction of individual options causes a permanent price increase in the underlying security, beginning approximately three days before introduction.
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Leaning for the Tape: Evidence of Gaming Behavior in Equity Mutual Funds
TL;DR: This paper found that fund managers inflate late quarter-end portfolio prices with last-minute purchases of stocks already held, and that the stocks held by the funds with the most incentive to inflate their portfolio prices were the stocks with the best performance.
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Options markets and stock return volatility
TL;DR: This article examined the variance of returns on common stocks around the time exchange-traded options are listed on these stocks and found that stock return variance declines after options listing, and that this phenomenon is not fully explained by contemporaneous shifts in market volatility.