The options market response to accounting earnings announcements

We examine the reaction of the equity options market to accounting earnings announcements over the period 1996–2008 using changes in implied volatility to measure the options market response to earnings news. We find that positive earnings surprises and positive profit announcements produce a larger uncertainty resolution than negative earnings surprises and loss announcements. We demonstrate an inverse relation between the change in implied volatility and earnings news in a three-day window immediately after an earnings announcement. We refer to the magnitude of this relation as the ‘options market earnings response coefficient’. This ‘options market earnings response coefficient’ is stronger for both bad news announcements and positive profit announcements. We do not find any significant relation between changes in implied volatility and earnings news in the pre- or post-announcement periods. We conclude that the options market efficiently absorbs earnings information.     

夯实做市商制度建设协力推进外汇市场发展

近年来,外汇市场汇价波幅逐步有序拓宽,而面对不断扩大的汇率波幅,一些做市机构的交易员出现了不适应的情况。文章指出,外汇做市商制度的切实履行和健全完善,对于规范做市交易与市场良性交易氛围的形成和推广,具有至关重要的作用。文章介绍了我国外汇市场建立做市商制度的目的、所采取的相关配套制度改革,展望做市商考评机制的改进方向,并就进一步规范外汇市场发展提出相关倡议。     

SEC product-line reporting and market efficiency

This study tests the efficiency of the securities market with respect to non-public segment earnings data for 1967–1969 which was first made public by many firms in 1970 SEC 10-K reports. Trading rule strategies are proposed in which segment-based earnings forecasts are compared to consolidated-based forecasts to anticipate ‘unexpected’ changes in earnings. Using the ‘market model’ to eliminate market related movements in security prices, average monthly abnormal returns conditional on this segment-based strategy are estimated for 1968, 1969, and 1970 for two groups of firms: (1) ‘Non-disclosure’ firms that did not publicly report either segment revenue or profit data prior to 1970, and (2) ‘partial disclosure’ firms that publicly reported segment revenue information, but no segment profits, prior to 1970.The results suggest that the market was not efficient with respect to the non-public segment revenue and profit data of non-disclosure firms for 1968–1969. However, this finding could not be replicated for 1970. The average monthly abnormal returns conditional on the segment-based trading rule strategy were found to be relatively small for the partial disclosure firms. This suggests that segment revenue data can be used to successfully anticipate changes in total entity earnings which would otherwise be ‘unexpected’ if only consolidated data were available.     

Decimalization,adverse selection,and market maker rents

I address the issue of how decimalization impacts the information acquisition decision of traders. I show that traders have less of an incentive to improve the quality of their information and, consequently, trades tend to be less informative following a reduction in the minimum tick. This result is consistent with the empirical finding that reductions in the minimum tick lead to declines in the adverse selection component, a finding counter to the theoretical predictions in the literature. This result also explains how the predicted savings from decimalization can exceed even total market maker profits. In addition, I show that even if market makers are perfectly competitive, a minimum tick can lead to multiple spread equilibria, some of which being more than one tick away from the underlying, or “no-tick”, equilibrium spread. Finally, I discuss the implications of the model for payment for order flow/internalization and the existence of an optimal tick size.     

Algorithmic market making for options

In this article, we tackle the problem of a market maker in charge of a book of options on a single liquid underlying asset. By using an approximation of the portfolio in terms of its vega, we show that the seemingly high-dimensional stochastic optimal control problem of an option market maker is in fact tractable. More precisely, when volatility is modeled using a classical stochastic volatility model—e.g. the Heston model—the problem faced by an option market maker is characterized by a low-dimensional functional equation that can be solved numerically using a Euler scheme along with interpolation techniques, even for large portfolios. In order to illustrate our findings, numerical examples are provided.     

The market spread,limit orders,and options

In this article the determinants of the quoted market spread of options are analyzed. The empirical model is based on an extension of the Ho and Stoll model of the market spread in a market with competing market makers and limit order traders. It is shown that the part of the liquidity that is supplied by limit orders vis-à-vis market makers is negatively related to the size of the market spread. This observation combined with regularities over the day in the thickness of the book of limit orders, allows us to offer a new explanation for the intraday pattern in the bid-ask spread. The article uses intraday data from the book of limit orders, transaction data, and quotation data.The author extends thanks to Bruno Biais, Phelim Boyle, Marius Jonkhart, Angelien Kemma, Teun Kloek, and George Sofianos for helpluf comments. This article was presented at the WFA-meetings in Jackson, the Financial Options Research Centre in Coventry, the EFA-meetings in Rotterdam, and the Conference on World Trading Markets at Vanderbilt University.     

Modelling exchange-traded barrier options traded in the Australian options market

Barrier options traded in the Australian market vary considerably in terms of the extent to which the barrier is monitored and in terms of the location of the barrier level relative to the exercise price. This paper examines the impact of these differences on prices and also on deltas and gammas. We find that it is not possible to generalize results concerning hedge parameter values to all barrier options. We find that options examined by Easton et al. (2004) do not display discontinuity of deltas at the barrier levels and that their apparent overpricing cannot be attributed to hedging difficulties.     

Estimating bid-ask spread components: Specialist versus multiple market maker systems

This paper tests two competing hypotheses concerning the relationship between adverse selection costs on NASDAQ versus specialist-dominated exchanges. We reject the hypothesis that specialist-dominated exchanges have smaller adverse selection costs than exchanges with multiple market makers. We provide direct evidence on the timing differences between closing transactions and quotes as well as evidence on the extent of nontrading on the AMEX and NYSE but cannot reject the hypothesis that adverse selection costs are a function of average transaction size (which is generally larger on the AMEX and NYSE). We also provide insight into institutional differences across exchanges and the ISSM data base.     

Capital market frictions and human capital investment: Evidence from workplace safety around regulation SHO

This paper examines the effect of capital market frictions on firms’ workplace safety. Using Regulation SHO as a natural experiment, we find a significant increase in work-related injury rates of pilot firms. The effect is stronger for firms in more competitive industries and with high financial constraints, and weaker for firms whose employees have high negotiating power and with good corporate governance. Further tests suggest that managers’ myopia shifts their focus away from investments in workplace safety when workplace safety is not related to firm performance. Overall, the results highlight how capital market frictions affect firms’ investment in human capital.     

The contribution of market makers to liquidity and efficiency of options trading in electronic markets

This paper examines the contribution of market makers to the liquidity and the efficiency of the options market in a unique setup of an order-driven computerized trading system, in which market makers and other participants operate under equitable conditions. The main findings are: (1) liquidity increased – a 60% increase in trading volume and a 35% decrease of bid–ask spreads; (2) the efficiency of shekel–euro options trading improved – deviations from put–call parity decreased significantly by 12%, and skewness decreased by about 30%. We also find that the net cost to the exchange is out weighted by the benefit to the trading public and that the presence of market makers encouraged trading between other participants far beyond their own trading.     

企业年金市场进入规制研究

本文从质量和数量两个维度考察中国企业年金市场进入规制。质量规制目标明确,最低资质标准能够保证企业年金基金管理机构的底线质量,但受评审专家与金融机构之间信息不对称干扰,资格认定机制无法保证经营牌照发放给真正优秀的金融机构。资格认定机制也是数量规制措施,监管当局缺乏对企业年金市场合理市场结构的明确判断,政策的摇摆导致早期企业年金市场恶性价格竞争,未来垄断合谋的可能性增强。     

An empirical examination of market maker profits on the London stock exchange

This article uses transaction data to analyze the impact of asymmetric information and market marker risk aversion on the size of market maker profits. The observed bid-ask spread across the 14 stocks in the sample lies in the range of 1–5%. In the absence of asymmetric information and risk aversion, market makers would expect to receive half the spread on average as profit. In fact, their profit is less than half of this for all shares in the sample, and in half the stocks it is actually negative. A methodology is developed to identify separately the impact of information effects and risk aversion, but the results are inconclusive.     

谈证券监管两个口号

证券市场频频出问题,于是人们寄希望于监管部门,有两个口号喊得最响,效果如何呢     

Efficiency of the foreign currency options market

This paper provides a new test of the efficiency of the currency option markets for four major currencies — British Pound, Euro, Swiss Frank and Japanese Yen vis-à-vis the U.S. dollar. The approach is to simulate trading strategies to see if the well-accepted no-arbitrage condition of put–call parity (PCP) holds in a trading environment. Augmented Dickey–Fuller and Philips–Perron tests are used to check for the presence of unit roots in the data, followed by a formal econometric analysis. The results indicate that the most currency option prices do not violate the PCP conditions, when transaction costs are allowed for.     

Trading costs for listed options: The implications for market efficiency

This paper reexamines the anomalous evidence concerning the efficiency of the listed options exchanges. We focus on the structure of trading costs in that market, and note several costs which generally have been ignored, the largest of which is the bid-ask spread. When we adjust the published trading rules for our estimates of these trading costs, the reported abnormal returns are eliminated.     

American futures options arbitrage: evidence from the Nikkei 225 options market

Previous studies have examined the profitability of European index options arbitrage. This paper adds to the literature by investigating the arbitrage profitability of American index options—the Nikkei 225 index futures options traded on the Singapore Stock Exchange (SGX). Using the real-time bid–ask prices, we find evidence of profitable arbitrage opportunities, while the frequency of observations violating no-arbitrage bounds and the magnitude of arbitrage profits decrease with the level of transaction costs. Our results have implications for the analysis of American options market efficiency. Failure to use bid–ask prices may lead to biased conclusions.     

The readability of company responses to SEC comment letters and SEC 10-K filing review outcomes

Review of Accounting Studies - An emerging literature shows that shareholders benefit from the Securities and Exchange Commission’s (SEC) filing reviews in terms of improved disclosures and...     

新三板做市商典型违规案例评析

新三板做市商常见违法行为包括：不履行或不规范履行报价义务;内幕交易,即利用内幕信息进行投资决策和交易。操纵市场,即利用信息优势和资金优势;串通报价或信息;以不正当方式。影响其他做市商做市;与所做市的挂牌公司及其股东就股权回购、现金补偿等作出约定;做市业务人员通过做市向自身或利益相关者进行利益输送。     

监管与合作：美国证监会与共同基金

SEC与基金业的关系为合作伙伴关系，两方都担负着责任。基金业承担着操作责任和公众责任，它须使这个行业保持创新与竞争的状态，并保护投资的利益。SEC承担的诸多责任中，最重要的是尊重自由市场的神奇力量，并在可能的时候利用市场的方式如信息披露，解决市场的问题。证监会与基金业的关系为美国的投资提供了半个多世纪的良好服务。     

Underlying assets for which options complete the market

This paper shows that investigations on the spanning power of options in spaces of integrable and continuously distributed payoffs can be conducted in the space of Lebesgue integrable claims on [0,1]. It is proved that there are infinite many underlying assets for which options span spaces of integrable claims. It is also shown that options on a single underlyer fail to complete the spaces of continuous contingent claims that are defined over a noncompact state-space.