Price discovery among SSE 50 Index‐based spot, futures, and options markets

Abstract

This paper studies the contribution of newly launched SSE 50 Index‐based options and futures to price discovery. We find that the derivatives markets quickly begin exhibiting price leadership over the corresponding spot market, despite their short history; the information share from both derivatives markets rose from 59.84% in mid‐2015 to 84.6% in mid‐2017. Using substantial regulation changes during the sample period, we test the trading cost hypothesis. The increases in derivatives transaction costs do not immediately impede their roles in price discovery. Findings suggest that in nascent and immature markets, investors’ trading experience matters more than trading costs.

BitMEX bitcoin derivatives: Price discovery, informational efficiency, and hedging effectiveness

“…Table reports the regression results. BitMEX is stronger when the spot exchanges have relatively greater bid–ask spreads and smaller trading volume, consistent with previous empirical findings that less costly transactions and more trading are conducive to faster information incorporation (Ahn, Bi, & Sohn, ; Chakravarty et al, ; Chen & Chung, ). Specifically, column (1) shows that when the relative bid–ask spread (trading volume) of spot exchanges increases by 1 standard deviation, the MIS of BitMEX rises by 5.37% (falls by 1.87%).…”

“…possible permutations for K state variables, we compute the IS of each market as the average value from the K! permutations, which is the same calculation method as So and Tse (2004) and Ahn et al (2019). Lien and Shrestha (2009) suggest an improved version of IS that does not depend on the order of the state variables, and call it the MIS.…”

Volatility index and the return–volatility relation: Intraday evidence from Chinese options market

“…Based on the results, we believe that one potential reason for the abnormal positive correlation lies in the characteristics of the investor structure in Chinese market. As the SSE 50 ETF options are the first exchange‐traded options in mainland China, Ahn et al () conjecture that the inexperience of investors influences the price discovery of a nascent derivative market. This fact may also contribute to the positive correlation between iVX and the underlying asset.…”

“…Ten years later, the SSE introduced the SSE 50 ETF options on February 9, 2015, which are the first exchange‐traded options in mainland China. See more details in Ahn, Bi, and Sohn ().…”

Is Indian Equity Options Market Suitable for Hedging When the Options Payoff Structure Changes?

“…The options price, as defined under BSOPM, is a function of the current value of the underlying asset, the variance of the rate of return of the underlying asset, the time to expiration, the risk-free rate of interest and the strike price of the options contracts (Black & Scholes, 1973). Using known and observed parameters in the BSOPM, except observed actual index level, the implied index level for call options and put options can be computed using following equations (1) and 2respectively:…”