Loading...
Please wait, while we are loading the content...
Similar Documents
Essays on option markets : empirical and theoretical learning models
| Content Provider | Semantic Scholar |
|---|---|
| Author | Bernales, Alejandro |
| Copyright Year | 2011 |
| Abstract | This thesis consists of three essays. The first two essays present empirical studies in which option market features related to information flows are examined. The third essay introduces a theoretical model to explain predictable dynamics in option pricing through the agents? learning process. In the first essay, I investigate the previously unexplored effects of asymmetric information on the adoption process of new equity options introduced into the market. I use a microstructure model to estimate measures of informational asymmetries. I discover that high informational asymmetries in the year prior to option listings produce larger levels of option adoption. Additionally, I find that option introductions induce reductions in asymmetric information. I also report that option bid-ask spreads start from low initial levels with a tendency to increase over time, which is unexpected since the introduced options are initially illiquid; however, this can be explained by the low level of initial activity by informed agents.The second essay examines whether the dynamics of the implied volatility surface of equity options contain exploitable predictability patterns. The option pricing predictability is expected due to the learning behaviour of agents in option markets. In particular, I explore the possibility that the dynamics of the implied volatility surface of individual equity options may be associated with subsequent movements in the volatility surface implicit in SP and hence it induces dynamics on the implied volatility surface. Furthermore, similarly to the predictability features observable in option market data, learning mechanisms make the option pricing dynamics predictable. |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | https://www.research.manchester.ac.uk/portal/files/54512759/FULL_TEXT.PDF |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
