Detecting abnormal trading activities in option markets

We develop an econometric method to detect "abnormal trades" in option markets, i.e., trades which are not driven by liquidity motives. Abnormal trades are characterized by unusually large increments in open interest, trading volume, and option returns, and are not used for option hedging purposes. We use a multiple hypothesis testing technique to control for false discoveries in abnormal trades. We apply the method to 9.6 million of daily option prices. (C) 2015 Elsevier B.V. All rights reserved.


Published in:
Journal Of Empirical Finance, 33, 263-275
Year:
2015
Publisher:
Amsterdam, Elsevier
ISSN:
0927-5398
Keywords:
Laboratories:




 Record created 2015-12-02, last modified 2018-03-17


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