The maturity effect of stock index futures: Speculation or carry arbitrage?

Using the implementation of trading restrictions on CSI 300 index futures market as a quasi-natural experiment, this paper examines the maturity effect of stock index futures and its determinants. The results show that the maturity effect changes from weakly positive to significantly negative after trading restrictions are implemented. We find that the change in the maturity effect is rooted in the speculative effect, which is measured by the time pattern of price sensitivity to information, while there is a lack of support for the carry arbitrage effect on the maturity effect of index futures. Our findings provide an opportunity to better understand volatility dynamics in the equity futures market.     

选择数量对满意度的影响——一个有调节的中介模型

增加选择数量是否会提高满意度是经济学、心理学和营销学的热点问题。当消费者对某一刺激目标同时存在积极和消极的评价时，即矛盾态度怎样影响选择数量和满意度的关系？2个实验结果表明，选择数量对满意度的影响是通过决策困难水平实现的，当选择数量影响决策困难水平时，会产生选择超载。矛盾态度对决策困难水平与满意度的关系有调节作用，对矛盾态度较高者，选择“多多益善”，选择数量增加使消费者满意度提高；相反，对矛盾态度较低者，选择“适可而止”，选择数量增加使消费者满意度降低。     

Is it still economic to build a new coal-fired power plant in the U.S.? A real option analysis

In the U.S., virtually no new coal-fired power plants have been built in recent years. Both industry experts and academics seem to believe that no rational firm will build a new coal-fired plant. Will such a trend continue in the future? To provide insights into this question, we investigate the optimal decision of an electricity company with an irreversible and deferrable opportunity to build either a new coal-fired or natural gas-fired power plant as its new base-load resource. According to our real option analysis, the optimal decision depends on the location. In the case of the eastern U.S., it is optimal to choose a natural gas plant if a firm is given a choice among a new natural gas plant, a new coal plant and deferring the investment. However, contrary to the common sentiment in the industry and academia, building a new coal plant in the western U.S. is still more economical than building a new natural gas plant in the absence of emission pricing. Furthermore, introducing carbon pricing to western U.S. states, as California did, can substantially increase the probability that a firm will optimally choose a natural gas plant over a coal plant.     

Option pricing in the moderate deviations regime

We consider call option prices close to expiry in diffusion models, in an asymptotic regime (“moderately out of the money”) that interpolates between the well‐studied cases of at‐the‐money and out‐of‐the‐money regimes. First and higher order small‐time moderate deviation estimates of call prices and implied volatilities are obtained. The expansions involve only simple expressions of the model parameters, and we show how to calculate them for generic local and stochastic volatility models. Some numerical computations for the Heston model illustrate the accuracy of our results.     

Semistatic hedging and pricing American floating strike lookback options

We price an American floating strike lookback option under the Black–Scholes model with a hypothetic static hedging portfolio (HSHP) composed of nontradable European options. Our approach is more efficient than the tree methods because recalculating the option prices is much quicker. Applying put–call duality to an HSHP yields a tradable semistatic hedging portfolio (SSHP). Numerical results indicate that an SSHP has better hedging performance than a delta-hedged portfolio. Finally, we investigate the model risk for SSHP under a stochastic volatility assumption and find that the model risk is related to the correlation between asset price and volatility.     

Good jump,bad jump,and option valuation

I develop a new class of closed‐form option pricing models that incorporate variance risk premium and symmetric or asymmetric double exponential jump diffusion. These models decompose the jump component into upward and downward jumps using two independent exponential distributions and thus capture the impact of good and bad news on asset returns and option prices. The empirical results show that the model with an asymmetric double exponential jump diffusion improves the fit on Shanghai Stock Exchange 50ETF returns and options and provides relatively better in‐ and out‐of‐sample pricing performance.     

Hedging and pricing early-exercise options with complex fourier series expansion

We introduce a new numerical method called the complex Fourier series (CFS) method proposed by Chan (2017) to price options with an early-exercise feature—American, Bermudan and discretely monitored barrier options—under exponential Lévy asset dynamics. This new method allows us to quickly and accurately compute the values of early-exercise options and their Greeks. We also provide an error analysis to demonstrate that, in many cases, we can achieve an exponential convergence rate in the pricing method as long as we choose the correct truncated computational interval. Our numerical analysis indicates that the CFS method is computationally more comparable or favourable than the methods currently available. Finally, the superiority of the CFS method is illustrated with real financial data by considering Standard & Poor’s depositary receipts (SPDR) exchange-traded fund (ETF) on the S&P 500® index options, which are American options traded from November 2017 to February 2018 and from 30 January 2019 to 21 June 2019.     

The price discovery role of day traders in futures market: Evidence from different types of day traders

Using proprietary account-level transaction data in the futures market where day traders are self-declared ex ante, this study investigates whether day traders enhance price discovery at the market level. From a natural classification of day traders, we find that heterogeneous day traders have differential effects on price discovery. Self-declared day traders, who benefit from low margin requirement, do not improve price discovery measured by information share. In contrast, non-declared traders, who are not self-declared as day traders, improve price discovery. Their positive impacts on price discovery are particularly significant during periods of high volatility and arrival of new information. Overall, a margin stimulating policy may encourage more day trading, but may also attract overconfident investors, especially inexperienced ones, and who do not enhance price discovery.