Detecting Abnormal Trading Activities in Option Markets
University of Zurich - Swiss Banking Institute (ISB); Ecole Polytechnique Fédérale de Lausanne - Swiss Finance Institute
University of Zurich - Swiss Banking Institute (ISB)
Ecole Polytechnique Fédérale de Lausanne; Ecole Polytechnique Fédérale de Lausanne - Swiss Finance Institute
January 22, 2015
Swiss Finance Institute Research Paper No. 11-42
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.
Number of Pages in PDF File: 36
Keywords: Options Trades, Open Interest, False Discovery Rate, Massive dataset
JEL Classification: G12, G13, G17
Date posted: January 13, 2010 ; Last revised: January 23, 2015
© 2016 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollobot1 in 0.266 seconds