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Underlying Stocks (underlying + stock)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting100%

Terms modified by Underlying Stocks

  • underlying stock price
    		•

    Selected Abstracts

    Clearly Irrational Financial Market Behavior: Evidence from the Early Exercise of Exchange Traded Stock Options

    THE JOURNAL OF FINANCE, Issue 1 2003
    Allen M. Poteshman
    This paper analyzes the early exercise of exchange-traded options by different classes of investors over the 1996 to 1999 period. A large number of exercises are identified as clearly irrational without invoking any model of market equilibrium. Customers of discount brokers and customers of full-service brokers both engage in a significant number of irrational exercises while traders at large investment houses exhibit no irrational early exercise behavior. Rational and irrational exercise is triggered for discount and full-service customers by the underlying stock price attaining its highest level over the past year and by high returns on the underlying stock. [source]

    A note on the derivation of Black-Scholes hedge ratios

    THE JOURNAL OF FUTURES MARKETS, Issue 11 2003
    Tie Su
    An option hedge ratio is the sensitivity of an option price with respect to price changes in the underlying stock. It measures the number of shares of stocks to hedge an option position. This article presents a simple derivation of the hedge ratios under the Black-Scholes option-pricing framework. The proof is succinct and easy to follow. © 2003 Wiley Periodicals, Inc. Jrl Fut Mark 23:1119,1122, 2003 [source]

    Price Discovery and Liquidity in Basket Securities

    FINANCIAL REVIEW, Issue 2 2008
    Thomas Henker
    G10 Abstract Basket securities enable investors to purchase a broad portfolio of securities in a single transaction. We examine the link between HOLDRS, a basket security comprising stocks from an industry or sector, and the underlying stocks. We find that the price of the portfolio of underlying securities leads and is more informative than the basket price. Our results are contrary to the findings of empirical studies that use futures, which are basket securities with features less like those of the underlying equities. Our findings suggest uninformed investors can minimize adverse selection costs by trading basket securities rather than the underlying stocks. [source]

    Return Linkages between Dual Listings under Arbitrage Restrictions: A Study of Indian Stocks and Their London Global Depositary Receipts

    FINANCIAL REVIEW, Issue 4 2003
    Palani-Rajan Kadapakkam
    G14/G15/N25 Abstract We examine the linkages between returns on Indian global depositary receipts (GDRs) in London and their underlying stocks in India. GDR returns are sensitive to returns observed earlier in India. This sensitivity is more pronounced for more liquid GDRs. Although arbitrage is not feasible for GDRs that sell at a premium, these GDRs are, nevertheless, sensitive to Indian returns. The sensitivity is greater for GDRs selling at a discount, where costly arbitrage is feasible. GDR returns have a significant but small effect on subsequent returns of the underlying stocks, with more liquid GDRs having a slightly greater impact. [source]

    Volatility Information Trading in the Option Market

    THE JOURNAL OF FINANCE, Issue 3 2008
    SOPHIE X. NI
    ABSTRACT This paper investigates informed trading on stock volatility in the option market. We construct non-market maker net demand for volatility from the trading volume of individual equity options and find that this demand is informative about the future realized volatility of underlying stocks. We also find that the impact of volatility demand on option prices is positive. More importantly, the price impact increases by 40% as informational asymmetry about stock volatility intensifies in the days leading up to earnings announcements and diminishes to its normal level soon after the volatility uncertainty is resolved. [source]

    Efficiency of single-stock futures: An intraday analysis

    THE JOURNAL OF FUTURES MARKETS, Issue 6 2008
    Joseph K.W. Fung
    Using intraday bid,ask quotes of single-stock futures (SSFs) contracts and the underlying stocks, the pricing and informational efficiency of SSF traded on the Hong Kong Exchange are examined. Both the SSFs and the stocks are traded on electronic platforms. The market microstructure and the data obviate the problems of stale and non-executable prices as well as uncertain bid,ask bounce of the thinly traded futures contracts. Nominal price comparisons show that more than 80% of SSF quotes are inferior to stock quotes. More than 99% of the observed futures spreads are above one stock tick compared with only 2% of those for stocks. After adjusting for the cost-of-carry, however, SSFs are fairly priced. Given higher stock trading costs, non-members should even find the futures attractively priced. Thus, the absence of competitive market maker does not bias prices so as to discourage trading. SSF quotes also account for one-third of price discovery despite their low volume. © 2008 Wiley Periodicals, Inc. Jrl Fut Mark 28:518,536, 2008 [source]

    Order imbalance and the dynamics of index and futures prices

    THE JOURNAL OF FUTURES MARKETS, Issue 12 2007
    Joseph K.W. Fung
    This study uses transaction records of index futures and index stocks, with bid/ask price quotes, to examine the impact of stock market order imbalance on the dynamic behavior of index futures and cash index prices. Spurious correlation in the index is purged by using an estimate of the "true" index with highly synchronous and active quotes of individual stocks. A smooth transition autoregressive error correction model is used to describe the nonlinear dynamics of the index and futures prices. Order imbalance in the cash stock market is found to affect significantly the error correction dynamics of index and futures prices. Order imbalance impedes error correction particularly when the market impact of order imbalance works against the error correction force of the cash index, explaining why real potential arbitrage opportunities may persist over time. Incorporating order imbalance in the framework significantly improves its explanatory power. The findings indicate that a stock market microstructure that allows a quick resolution of order imbalance promotes dynamic arbitrage efficiency between futures and underlying stocks. The results also suggest that the unloading of cash stocks by portfolio managers in a falling market situation aggravates the price decline and increases the real cost of hedging with futures. © 2007 Wiley Periodicals, Inc. Jrl Fut Mark 27:1129,1157, 2007 [source]