Volatility Discovery and Volatility Quoting on Markets for Options and Warrants

Journal of Futures Markets 38 (7/2018), 758–774

43 Pages Posted: 3 Oct 2017 Last revised: 14 Jan 2020

See all articles by Rainer Baule

Rainer Baule

University of Hagen

Bart Frijns

Open University of the Netherlands - School of Management

Milena Tieves

University of Hagen

Date Written: September 29, 2017

Abstract

In several countries, classical options markets coexist with markets for bank-issued options, also termed warrants. It is an open question if warrant issuers purely adopt options market information about future volatility or if they contribute to volatility discovery by their own. As a result, the options market is in a clear informational leadership with an information share highly significant above 0.5. Nevertheless, the aggregated warrants market also contributes to volatility discovery with an information share significantly different from zero. Considering the volatility quoting behavior of issuers, we find a possible strategy of warrants issuers exploiting intra-day investors.

Keywords: Information Share, Volatility Discovery, VDAX-NEW, Bank-Issued Warrants, Options, Retail Investors

JEL Classification: G10, G14, C10, C32

Suggested Citation

Baule, Rainer and Frijns, Bart and Tieves, Milena, Volatility Discovery and Volatility Quoting on Markets for Options and Warrants (September 29, 2017). Journal of Futures Markets 38 (7/2018), 758–774, Available at SSRN: https://ssrn.com/abstract=3045260 or http://dx.doi.org/10.2139/ssrn.3045260

Rainer Baule

University of Hagen ( email )

Universitaetsstrasse 41
Hagen, 58097
Germany

Bart Frijns

Open University of the Netherlands - School of Management ( email )

Valkenburgerweg 177
Heerlen, NL-6401DL
Netherlands

Milena Tieves (Contact Author)

University of Hagen ( email )

Universitätsstrasse 41
Hagen, 58084
Germany

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