Options market makers' hedging and informed trading: Theory and evidence

被引：9

作者：

Huh, Sahn-Wook ^{[1
]}

Lin, Hao ^{[2
]}

Mello, Antonio S. ^{[3
,4
]}

机构：

[1] SUNY Buffalo, Sch Management, Buffalo, NY 14260 USA

[2] Calif State Univ Sacramento, Coll Business Adm, Sacramento, CA 95819 USA

[3] Univ Wisconsin, Sch Business, Madison, WI 53706 USA

[4] MIT, Sloan Sch Management, Cambridge, MA 02139 USA

来源：

JOURNAL OF FINANCIAL MARKETS | 2015年 / 23卷

关键词：

Options market making; Hedging; Informed trading; Adverse-selection risk; Bid-ask spreads; STOCK-PRICES; SHORT SALES; INFORMATION; VOLUME; LIQUIDITY; SECURITY; INSIDER; RISK; REPLICATION; INVENTORY;

D O I：

10.1016/j.finmar.2015.01.001

中图分类号：

F8 [财政、金融];

学科分类号：

0202 ;

摘要：

We develop a model to analyze the effects of hedging activities by options market makers (OMMs) facing informed trading. The model suggests that OMMs' hedging activities motivated by adverse-selection risk lead to wider spreads in both stock and options markets. The hedging effect on spreads is more pronounced in the options market than in the stock market. The effect is larger when the OMMs hedge with the underlying asset than with other options. In addition, hedging activities by the OMMs significantly alter the trading strategies of-informed traders. Our empirical tests provide evidence consistent with the key implication of our model. (C) 2015 Elsevier B.V. All rights reserved.

引用

页码：26 / 58

页数：33

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