Last edited by Akidal
Tuesday, May 5, 2020 | History

1 edition of Trading mechanisms, speculative behavior of investors, and the volatility of prices found in the catalog.

Trading mechanisms, speculative behavior of investors, and the volatility of prices

spot versus futures

by Hun Y. Park

  • 343 Want to read
  • 21 Currently reading

Published by College of Commerce and Business Administration, University of Illinois Urbana-Champaign in [Urbana, Ill.] .
Written in English


Edition Notes

Includes bibliographical references (p. 23-24).

StatementHun Y. Park
SeriesBEBR faculty working paper -- no. 1572, BEBR faculty working paper -- no. 1572.
ContributionsUniversity of Illinois at Urbana-Champaign. College of Commerce and Business Administration
The Physical Object
Pagination24, [14] p. :
Number of Pages24
ID Numbers
Open LibraryOL25126986M
OCLC/WorldCa23603438

This book provides a unique and practical perspective about options trading that should be required reading for professional and individual investors.” —ARTHUR TISI, Founder and CEO, EXA Infosystems; private investor and options trader In The Volatility Edge in Options Trading, leading options trader Jeff Augen introduces breakthrough. Volatility Strategies for 10 Option strategies involve risk and are not suitable for all investors. Multiple leg strategies, including spreads, will incur multiple commission charges. Speculative Volatility Strategies Long Straddle Long Strangle Calendar Spread (Time Spread) Volatility hedging Long VIX calls / call spreads. A stock trader or equity trader or share trader is a person or company involved in trading equity traders may be an agent, hedger, arbitrageur, speculator, equity trading in large publicly traded companies may be through a stock shares in smaller public companies may be bought and sold in over-the-counter (OTC) markets. Speculation is the purchase of an asset (a commodity, goods, or real estate) with the hope that it will become more valuable in the near finance, speculation is also the practice of engaging in risky financial transactions in an attempt to profit from short term fluctuations in the market value of a tradable financial instrument—rather than attempting to profit from the underlying.


Share this book
You might also like
national heritage of Zanzibar

national heritage of Zanzibar

Deference and paternalism in the cotton industry of North-East Lancashire during the twentieth century.

Deference and paternalism in the cotton industry of North-East Lancashire during the twentieth century.

Eight sermons preachd at the Honourable Robert Boyles lecture

Eight sermons preachd at the Honourable Robert Boyles lecture

Laser-induced damage in optical materials : 2007

Laser-induced damage in optical materials : 2007

Maimonides

Maimonides

California environment and energy

California environment and energy

Thinning to prevent mountain pine beetles in lodgepole and ponderosa pine

Thinning to prevent mountain pine beetles in lodgepole and ponderosa pine

Methodist school hymnal ....

Methodist school hymnal ....

Statistical summaries of selected Iowa streamflow data through September 1996

Statistical summaries of selected Iowa streamflow data through September 1996

Product variety, price elasticity of demand, and fixed cost in spatial models

Product variety, price elasticity of demand, and fixed cost in spatial models

The forgotten island

The forgotten island

Willamette and Cascade Mountain Wagon Road Company.

Willamette and Cascade Mountain Wagon Road Company.

MILLER BUILDING SYSTEMS, INC.

MILLER BUILDING SYSTEMS, INC.

A Certain Life

A Certain Life

Celluloid printing plates.

Celluloid printing plates.

Leaving certificate poetry 1994

Leaving certificate poetry 1994

Moonrise

Moonrise

Trading mechanisms, speculative behavior of investors, and the volatility of prices by Hun Y. Park Download PDF EPUB FB2

Lly,followingpreviousstudies,aconventionalestima- torofthe volatility is usedwhich is the variance ofthe changes in observedpricesoverfixed time intervals (e.g.

Trading mechanisms, speculative behavior of investors, and the volatility of prices: spot versus futures.

By Hun Y. Park. Abstract. Includes bibliographical references (p. ) Publisher: [Urbana, Ill.]: College of Commerce and Business Administration, University of Illinois Urbana-Champaign, Year: OAI Author: Hun Y. Speculative behavior of investors.

Market Trading mechanisms and Investor Behavior By ROBERT J. SHILLER* It appears that speculative asset prices tend to show excess volatility relative to simple present value efficient markets models, and that prices are partly forecastable as tending to returning to "mean," appropriately de-fined.' But what does this tell us about how.

in which investors with realization utility exhibit risk-seeking behavior. These investors may holdandtrademorefrequentlyhigh-volatility stocks because those stocks offer a greater chance of realizing gains.

Motivated by these earlier studies, we examine whether speculative trading activities of retail investors affect Trading mechanisms Size: KB. investors, and explicitly study speculative behavior of investors speculative market for a single risky asset with limited supply and many risk-neutral agents, in a continuous time model with infinite horizon.

They show that the resale option leads to speculative trading, and contributes a speculative component speculative behavior of investors stock prices. In addition, fluctuations on the option value add toCited by: Zhang ). Han and Kumar () find that stocks whose trading is dominated by speculative retail investors tend to be overpriced and earn significantly negative alpha.

1 In addition to directly affecting stock prices via trading, speculative trading can also and the volatility of prices book stock prices by imposing extra risks on by: 5. Market Participants' Behavior and Pricing Mechanisms Investors use the options market mainly for speculative trading, rather than for hedging purposes Furthermore, when considering dealer pricing behavior and investor behavior, it is necessary to giveCited by: 5.

Speculation involves trying to make a profit from a security's price change, whereas hedging attempts to reduce the amount of risk, or volatility, associated with a security's price change.

Hedging Author: Brian Beers. of herding behavior. Market analysts sometimes pin down the origins of volatility to either uninformed trading or collective irrationality—possibly resulting from herding behavior. Such an approach reinforces the view that speculation can lead to unjustified price variability.

The debate over speculation and excess volatility has become more of a. options trading gives volatility exposure If the volatility of an underlying is zero, then the price will not move and an option’s Trading mechanisms.

is equal to the intrinsic value. in which investors with realization utility exhibit risk-seeking behavior. These investors may holdandtrademorefrequentlyhigh-volatility stocks because those stocks offer a greater chance of and the volatility of prices book gains.

speculative behavior of investors Motivated by these earlier studies, we examine whether speculative trading activities of retail investors affect asset prices.

This book is about trading volatility. More specifically, it is about using options to make trades that are primarily dependent on the range of the underlying instrument rather thanitsdirection. Before discussing technicalities, I give a brief description of my trading philosophy.

In trading, as in most things, it is necessary to have generalFile Size: 3MB. liquidity premium. Our findings suggest that the effect of investors’ speculative behavior on stock prices is not negligible and that earnings announcements serve as an important mechanism for regulating overpricing caused by speculative trading.

ixAuthor: Hsiao-Fen Yang. ically, as the volatility of the di erence in investors’ opinions increases, investors trade more Trading mechanisms and the value of the resale option also increases.

This results in a positive association between trading volume and prices. It is complicated to directly test overvaluation with data from the Nasdaq.

In addition, investors cannot short the stock and go long in the under priced warrant. In this way, the earlier regulation prevented rational investors from driving warrant prices to reasonable levels and moreover, the T+1 trading mechanism prevented shareholders.

The price dynamics and speculative trading in cryptocurrency is examined by Blau [11] with the main finding that speculative behavior cannot be directly connected to the unusual return and.

Dorn and Huberman [3], Han and Kumar [4], and Kumar [5] argue that speculative trading by retail investors can result in overvalued asset prices that subsequently drop to rational levels because. The Idiosyncratic Volatility Puzzle daily firm-specific residual by subtracting the daily industry-i return:ε ijst = R ijst − R ist.

(1) R ijst is the return on day s in month t of stock j that belongs to industry i and R ist is the value-weighted return of industry i on day s in monthwe obtain the month-t idiosyncratic volatility (IV) of stock j that belongs to.

high priced stocks, but show that retail trading increases return volatility of low-priced stocks. Due to data limitation, the studies on investor composition and volatility have been focusing on either institutional investors or retail investors.2 The goal of this paper is to explore how the heterogeneity in investors’ trading behavior af-Cited by: 2.

Options trading involves certain risks that the investor must be aware of before making a trade. This is why, when trading options with a broker, you. to zero, the behavior of inventories and futures-spot spreads are simply inconsistent with the view that speculation was a signi cant driver of spot prices.

Across our sample, speculation decreased prices on average or left them essentially unchanged, and reduced peak prices by roughly 5 percent. When we focus on four speci c periods of price. The chapters on options and volatility together constitute 50% of the book, the slightly longer chapter on volatility concentrating on the dynamic properties the two volatility surfaces the implied and the local volatility surfaces that accompany an option pricing model, with particular reference to hedging.

the future. If they do reopen, a speculative phenomenon may appear. An investor may buy the stock now so as to sell it later for more than he thinks it is actually worth, thereby reaping capital gains. This possibility of speculative profits will then be reflected in the current price. Keynes (, Ch.

12) attributes primary importance to this. We show that retail trading activity has a positive effect on the volatility of stock returns, which suggests that retail investors behave as noise traders.

To identify this effect, we use a reform of the French stock market that raises the relative cost of speculative trading for retail investors. The daily return volatility. In Volatility Trading, Sinclair offers you a quantitative model for measuring volatility in or-der to gain an edge in your everyday option trading endeavors.

With an accessible, straightforward approach, he guides traders through the basics of option pricing, volatility measurement, hedging, money management, and trade evaluation/5(24).

How to Bear a Bull Market: The Psychology of Volatile Securities Trading. The wild up-and-down swings of the markets this week reveals the underlying dynamics of herd behavior in the buying and Author: Simon Makin. Rational Speculators and Exchange Rate Volatility I. Introduction A strong correlation seems to exist between trading volume and price volatility i n major currency markets (Baillie and BollerslevDacorogna, et al.Ito et al.

Evidence for such a corr elation is also abundant for major equity and bond markets (Cornell. To summarize, trading behavior - both speculation and hedging - may or may not influence price building in the spot market, cash prices, and volatility through the presented channels.

Though intensively debated on a theoretical level, the topic of financialization's impacts in general still suffers from a lack of consensus of by: 5.

Cited by: Huang, Roger D. & Masulis, Ronald W., "Trading activity and stock price volatility: evidence from the London Stock Exchange," Journal of Empirical Finance, Elsevier, vol. 10(3), pages, Georges & Zhou, Xiaozhou, "Information Environments and High Price Impact Trades: Implication for Volatility and Price Efficiency," Working PapersHEC Montreal.

Volatility trading Trading based on taking a view on market volatility different from that contained in the current set of market prices. This is different from position trading where the trades are based on the expectation of where prices are going.

Example A certain stock is trading File Size: KB. According to Section 3, it’s obtained that the speculative trading of underlying stocks is decreased after the introduction of short selling mechanism.

Specially, speculative trading of stocks with low market value and low idiosyncratic volatility are decreased more than those with high market value and high idiosyncratic volatility : Lixu Xie, Xindong Zhang, Yan Zhang, Dong Wang. developed rapidly as it opens to clients beyond the large institutional investor pool.

Speculation is driven by increasingly complex leveraged and inverse exposures including those that attempt to trade on significant roll costs in volatility futures curves. Longer-term investors use these products for the purposes of equity diversification. Details of the trading mechanism in the securities market covering trading sessions, order types, trade types, quotation rules, volatility control mechanism, trade prices, closing price calculation and guidenlines on previous closing price adjustments.

Why is it so hard to beat the market. How can you avoid getting caught in bubbles and crashes. You will find the answers in Carl Futia’s new book, The Art of Contrarian Trading. This book will teach you Futia’s novel method of contrarian trading from the ground up.

In 16 chapters filled with facts and many historical examples Futia explains the principles and practice of contrarian : Carl Futia.

It increases the chances of speculation resulting in volatility, which hurts the small investors. With the application of IT in the securities market - screen-based trading and trading through the Internet - it has been possible to reduce this settlement period.

Regarding investor behavior and speculation, the increased flow of information and democratized access to financial markets made it easier than ever to make speculative bets. Simply put, speculation increases when the barriers to speculating are reduced or removed by technology.

For instance, the ability to place buy/sell orders through an app. Book Summary. This top commodities book is an excellent introductory work on trading and investing in commodities which helps understand the kind of risks involved in the commodities market and how to deal with them efficiently.

Often, average investors tend to ignore or avoid commodities market either for lack of knowhow to identify and manage risks along with developing a successful strategy. Incrementally inching closer to a hour market, earlier this month, the Chicago Board Options Exchange (CBOE®) introduced an extended trading session for options on U.S.

options volatility (VIX. The drastic increase of food prices in the period spurred fears of global food insecurity. Apart from actual changes in supply and demand of some commodities, the upward swing might also have been amplified by speculation in organized futures markets.

However, limiting or banning speculative trading might do more harm than good. Oil Market Volatility. Though shifts in demand and reduced production by some major producers have influenced oil prices, investor behavior is also increasing market volatility.

the trading activity of investors and pdf stability of stock prices in the Tokyo Stock Exchange (TSE). Japanese margin regulation, first imposed inis very similar to regulation in the United States. The authorities responsible for changing margin require-ments .related to the behavior and impact of noise traders on asset prices to sketch mechanisms by which speculative expectations can affect crude oil prices.“ 15) Mayer, Jörg (UNCTAD) (): The Growing Financialisation of Commodity Markets: Divergences between Index Investors and Money Managers.

Journal of Development.The mechanism of trading that an exchange uses is important to investors because ebook mechanisms lend themselves to different trading volume limitations and pricing behaviors.

Basics A stock exchange, according to the Business Dictionary, is an "organized and regulated financial market where securities (bonds, notes, shares) are bought and.