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Šoltés, Michal. "Using Option Strategies in Trading." Procedia - Social and Behavioral Sciences 110 (January 2014): 979–85. http://dx.doi.org/10.1016/j.sbspro.2013.12.944.
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Fahlenbrach, Rüdiger, and Patrik Sandås. "Does information drive trading in option strategies?" Journal of Banking & Finance 34, no. 10 (October 2010): 2370–85. http://dx.doi.org/10.1016/j.jbankfin.2010.02.027.
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Choi, Byungwook. "Overpriced Puts Puzzle in KOSPI 200 Options Market." Journal of Derivatives and Quantitative Studies 17, no. 3 (August 31, 2009): 23–65. http://dx.doi.org/10.1108/jdqs-03-2009-b0002.
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The purpose of this paper is to examine the argument that the put options traded in the exchanges are too high, compared to the asset prices based on the classical CAPM model, and thus the short position of the put option would make a significant profit from trading. In order to explore the earlier report, this paper, using the KOSPI 200 index options market price, estimates the historical rate of return on several option trading strategies such as naked option, protective put, covered call, straddle, and strangle. Secondly this paper compares the historical rates of return on the option trading strategies and Sharpe ratios with those generated by Monte-Carlo simulation and examines whether the historical option returns are inconsistent with Black-Scholes model, Jump-diffusion model, Stochastic Volatility model, or Stochastic Volatility with Jump model. Thirdly, this paper computes the optimal asset allocation ratio among the risk-free asset, risky assets, and option trading strategies in the viewpoint of rational investors who maximize the CRRA utility function. The results show that the historical returns on short position of ATM and OTM puts are too high to explain based on the classical CAPM, and the optimal allocation ratios among put, risky asset, and the risk-free asset are different from those derived using Monte-Carlo simulation.
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BAYRAKTAR, ERHAN, and ZHOU ZHOU. "SUPER-HEDGING AMERICAN OPTIONS WITH SEMI-STATIC TRADING STRATEGIES UNDER MODEL UNCERTAINTY." International Journal of Theoretical and Applied Finance 20, no. 06 (September 2017): 1750036. http://dx.doi.org/10.1142/s0219024917500364.
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We consider the super-hedging price of an American option in a discrete-time market in which stocks are available for dynamic trading and European options are available for static trading. We show that the super-hedging price [Formula: see text] is given by the supremum over the prices of the American option under randomized models. That is, [Formula: see text], where [Formula: see text] and the martingale measure [Formula: see text] are chosen such that [Formula: see text] and [Formula: see text] prices the European options correctly, and [Formula: see text] is the price of the American option under the model [Formula: see text]. Our result generalizes the example given in Hobson & Neuberger (2016) that the highest model-based price can be considered as a randomization over models.
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Eraker, Bjørn. "The performance of model based option trading strategies." Review of Derivatives Research 16, no. 1 (July 25, 2012): 1–23. http://dx.doi.org/10.1007/s11147-012-9079-8.
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Singh, J. P. "On Volatility Trading & Option Greeks." GIS Business 12, no. 4 (July 22, 2017): 20–31. http://dx.doi.org/10.26643/gis.v12i4.3351.
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Commensurate with this exponential growth in the depth and breadth of derivative markets and the range of financial products traded therein, there needs to be developed a comprehensive mathematical framework to support the, hitherto, empirically established features of trading strategies involving these instruments. It is the objective of this article, to provide a mathematical backup for the various properties of volatility trading strategy using call options. Additionally, an attempt is made to elucidate the implications of behavior of various option Greeks on volatility trading.
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Kwon, Soon Shin, Byung Jin Kang, and Jay M. Chung. "Performance of Option Based Strategy Benchmark Index." Journal of Derivatives and Quantitative Studies 26, no. 2 (May 31, 2018): 183–216. http://dx.doi.org/10.1108/jdqs-02-2018-b0002.
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This paper develops “Strategy Benchmark Index (SBI)” using KOSPI200 options data from January 2004 to March 2017, and then investigates their performances. The SBIs were constructed in the same way as those published daily by CBOE. To effectively analyze the performance of these SBIs, we classified them into four types : (1) Return enhancement SBIs (six indices), (2) Volatility trading SBIs (two indices), (3) Directional trading SBIs (two indices) and (4) Other SBIs (two indices). The return enchancement SBIs include bechmark indices tracking the performance of various covered call strategies and put writing strategies, which are generally used to increase investment returns. The volatility trading SBIs include benchmark indices tracking the performance of well-known volatility trading strategies such as butterfly spread and condor. Benchmark indices tracking the performance of various types of zero-cost collar strategies are classified into the directional trading SBIs. Our empirical results are as follows. First, the risk-adjusted performances of nine SBIs of the total twelve SBIs constructed from KOSPI200 index options has been shown to be great. Second, from a portfolio perspective, some SBIs can be helpful to improve the portfolio performance of CRRA (Constant Relative Risk Aversion) investors. These results imply that passive investment strategies with KOSPI200 index options can provide additional benefits that both equities and bonds do not provide. Third, even when we use the traditional mean-variance framework other than expected utility theory to verify the economic benefit of the SBIs, our empirical results are found to be still valid. In conclusion, our results suggest that some passive investment strategies using KOSPI200 index options would be beneficial to long term investors.
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Jena, Sangram K., and Amarnath Mitra. "Golden Chariot Capital’s Foray into Option Trading." Asian Journal of Management Cases 16, no. 1 (March 2019): 9–20. http://dx.doi.org/10.1177/0972820119825978.
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The case presents a real-life situation faced by a research analyst to improve the performance of the funds under management by exploring the opportunities in the options market. Golden Chariot Capital (GCC), an investment firm with ₹500 million worth of assets under management, was failing in its objective to provide long-term capital appreciation with a steady income to its investors. GCC had its funds invested in publicly traded common stocks and corporate bonds. In the last 8 months, GCC failed to match up with the benchmark index. Ms Indira, a research analyst at GCC, was given the task to identify and suggest alternate avenues of investment. Indira brought forward a proposal to explore the derivatives market in general and options market in particular to improve the fund performance. After going through Indira’s proposal, few fund managers at GCC were reluctant to expose their funds to the speculative market of options. Hence, Indira was asked to conduct a pilot study on the payoffs resulting from selected income strategies using options. As an illustration, Indira came up with five income strategies comprising covered call, covered put, short straddle, short strangle and long iron condor that involved either selling of options resulting in income or reduction of cost of the portfolio. The case will help the students to learn about options and their payoffs, as well as strategies involving various options. The case is equally useful for practitioners taking a balanced view of the market to develop appropriate options related to income strategies.
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Hwang, Sang Won. "The Effect of Discriminative Trading Frictions on Option Strategies." Journal of Derivatives and Quantitative Studies 26, no. 1 (February 28, 2018): 27–57. http://dx.doi.org/10.1108/jdqs-01-2018-b0002.
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I estimate that a margin as trading frictions has an effect on the strategies of writing options. The important results are as follows. First, by the margin requirement is increased, the size of short position is reduced. Second, the discrimination of a margin requirement is due to the way that the member margin is imposed less about 1/3 than the customer margin by derivatives market business regulation in KRX. Third, the customer margin is from 1.4 to 1.6 times more than the member margin, and the margin “haircut” ratio is similar to that of the margin. Fourth, by target weight increases, the difference between target weight and effective weight is increased. Fifth, by target weight is increased, the member have higher returns on writing combination position than the customer have. It means that when investors increase the size of short position using all of account, they not only can suffer loss because of margin call but also can make profit. Overall, the difference between the returns of the member and the returns of the customer can be quite substantial. So, this paper contributes to the literature that studies the impact of the different imposition of margins by showing how frictions limit the customer from supplying liquidity to the market and hence releasing pressure on the member.
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Kalife, Aymeric, and Saad Mouti. "On Optimal Options Book Execution Strategies with Market Impact." Market Microstructure and Liquidity 02, no. 03n04 (December 2016): 1750002. http://dx.doi.org/10.1142/s2382626617500022.
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We consider the optimal execution of a book of options when market impact is a driver of the option price. We aim at minimizing the mean-variance risk criterion for a given market impact function. First, we develop a framework to justify the choice of our market impact function. Our model is inspired from Leland’s option replication with transaction costs where the market impact is directly part of the implied volatility function. The option price is then expressed through a Black– Scholes-like PDE with a modified implied volatility directly dependent on the market impact. We set up a stochastic control framework and solve an Hamilton–Jacobi–Bellman equation using finite differences methods. The expected cost problem suggests that the optimal execution strategy is characterized by a convex increasing trading speed, in contrast to the equity case where the optimal execution strategy results in a rather constant trading speed. However, in such mean valuation framework, the underlying spot price does not seem to affect the agent’s decision. By taking the agent risk aversion into account through a mean-variance approach, the strategy becomes more sensitive to the underlying price evolution, urging the agent to trade faster at the beginning of the strategy.
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Muravyev, Dmitriy, and Neil D. Pearson. "Options Trading Costs Are Lower than You Think." Review of Financial Studies 33, no. 11 (February 10, 2020): 4973–5014. http://dx.doi.org/10.1093/rfs/hhaa010.
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Abstract Conventional estimates of the costs of taking liquidity in options markets are large. Nonetheless, options trading volume is high. We resolve this puzzle by showing that options price changes are predictable at high frequency, and many traders time executions by buying (selling) when the option fair value is close to the ask (bid). Effective spreads of traders who time executions are less than 40% of the size of conventional measures, and the overall average effective spread is one-quarter smaller than conventional estimates. Price impact measures are also affected. These findings alter conclusions about the after-cost profitability of options trading strategies.
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Kang, Tae-Hun. "Strategies for Improving V-KOSPI 200 Index." Journal of Derivatives and Quantitative Studies 27, no. 1 (February 28, 2019): 1–47. http://dx.doi.org/10.1108/jdqs-01-2019-b0001.
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The study examines not only the methods for eliminating stale or abnormal prices but also strategies for enhancing liquidity in the KOSPI 200 index options market, for compensating the defects of V-KOSPI 200. First, introducing market making scheme in the KOSPI 200 options market can be the direct solution to prevent temporary fluctuations and spikes of the index arising from abnormal orders and to alleviate unnatural low variability (level) of the index through decreasing the use of stale market prices (model prices). Second, if weekly options underlying KOSPI 200 index are available for trading and investor interest in the weeklys are surged, Korea Exchange can enhance V-KOSPI 200 to include series of KOSPI 200 weekly options. The inclusion for at least 5~6 weekly options available for trading allow V-KOSPI 200 to be calculated with KOSPI 200 index option series that most precisely match the 30-day target time-frame for expected volatility that the Index is intended to represent. Along with these strategies for enhancing liquidity in the KOSPI 200 index options market, the study suggests the methodology which can prevents temporary fluctuations and spikes of the index by substituting stale or abnormal prices for normal prices.
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Bobriková, Martina. "Price risk management in the wheat market using option strategies." Ekonomika poljoprivrede 68, no. 2 (2021): 449–61. http://dx.doi.org/10.5937/ekopolj2102449b.
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Recently, the agricultural business is displayed a greater amount of risk because of price volatility growth. Consequently, it is necessary to have knowledge of how to regulate the risk of price fluctuations. This paper is concerned with the hedging techniques in the commodity market by the help of vanilla options. The main idea is to analyze option strategies with the ambition to demonstrate their utilization by hedging against increasing prices. Hedged buying price formulas are derived for every spot futures price. An additional contribution is considered for applying in the wheat trading. Chicago Mercantile Exchange products, i.e. wheat options on futures are investigated. The profitability of hedged scenarios is examined. A comparative analysis of the designed hedging variants is presented. Suggestions for potential wheat buyers are proposed.
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Keshari Jena, Sangram, and Ashutosh Dash. "Aditya Birla Money: developing options of investment strategy." Emerald Emerging Markets Case Studies 8, no. 3 (September 20, 2018): 1–27. http://dx.doi.org/10.1108/eemcs-08-2017-0223.
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Subject area Financial derivative and risk management. Study level/applicability The case is intended to be used for MBA and BBA programs in the elective courses such as derivatives and risk management, financial engineering, financial risk management and portfolio management, and for executives aspiring for the fund manager position in industry. The case could also be used in management development programs on financial risk management. Case overview The case was based on the real life experience of a portfolio manager who was entrusted with the responsibility of maximizing return of the portfolio. With the backdrop of dismal performance of the portfolio, the portfolio manager is looking for opportunity in the context of declaration of result by Infosys Ltd, one of the constituents of the portfolio. So the team headed by Nirakar Chaulia was thinking of development and application of option strategies to exploit the result day (i.e. January 14, 2016) opportunity to improve the performance of the portfolio and also reduce the potential of stock price risk. Moreover, the case was designed to help the students develop and assess different option strategies based on their market intuitions. Also, students would be able to apply the option contracts for managing price risk associated with the underlying asset. Expected learning outcomes The case would prepare students to develop different strategies to be exploited in different market conditions and assess their performance. Especially, this case was designed to enable the students to understand options as a special kind of derivative in terms of trading and its payoff, how to initiate directional and volatility trading with options, how to apply options to generate income to enhance the portfolio performance and how to develop option strategies for different market conditions and assess their performance. Supplementary materials Teaching note is available for instructors only. Subject code CSS 1: Accounting and Finance.
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Carvalho, Vitor H., and Raquel M. Gaspar. "Relativistic Option Pricing." International Journal of Financial Studies 9, no. 2 (June 18, 2021): 32. http://dx.doi.org/10.3390/ijfs9020032.
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The change of information near light speed, advances in high-speed trading, spatial arbitrage strategies and foreseen space exploration, suggest the need to consider the effects of the theory of relativity in finance models. Time and space, under certain circumstances, are not dissociated and can no longer be interpreted as Euclidean. This paper provides an overview of the research made in this field while formally defining the key notions of spacetime, proper time and an understanding of how time dilation impacts financial models. We illustrate how special relativity modifies option pricing and hedging, under the Black–Scholes model, when market participants are in two different reference frames. In particular, we look into maturity and volatility relativistic effects.
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Kang, Byung Jin, Cheoljun Eom, Woo Baik Lee, Uk Chang, and Jong Won Park. "A Study of the Performance of Option Strategy Benchmark Index in Global Option Markets." Korean Journal of Financial Studies 50, no. 4 (August 31, 2021): 439–72. http://dx.doi.org/10.26845/kjfs.2021.08.50.4.439.
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While most previous studies have analyzed the performance of the Option Strategy Benchmark Index (SBI) in a specific market such as S&P500 and KOSPI200, this study comprehensively investigates the performance of the option SBIs in nine global options markets in Europe, Asia, and Oceania. In the empirical analysis using the sample data from September 2008 to April 2019, the main results of this study are as follows. First, most of the option SBIs generally provide better performance than the simple buy-and-hold strategy, which is mainly due to a reduction in risk rather than improvement in returns. Second, the option SBIs based on straddle or protective put, one of the most popular option trading strategies, perform poorly in almost all markets, whereas the option SBIs based on covered call or (cash) covered put show relatively good performance. Finally, there is no significant difference in the performance of the option SBIs between markets in the same region or those with a similar level of development. However, we found significant differences in the performance of the option SBIs between Europe and Asia and developed and emerging markets.
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Brunhuemer, Alexander, Gerhard Larcher, and Lukas Larcher. "Analysis of Option Trading Strategies Based on the Relation of Implied and Realized S&P500 Volatilities." ACRN Journal of Finance and Risk Perspectives 10, no. 1 (2021): 166–203. http://dx.doi.org/10.35944/jofrp.2021.10.1.010.
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In this paper, we examine the performance of certain short option trading strategies on the S&P500 with backtesting based on historical option price data. Some of these strategies show significant outperformance in relation to the S&P500 index. We seek to explain this outperformance by modeling the negative correlation between the S&P500 and its implied volatility (given by the VIX) and through Monte Carlo simulation. We also provide free testing software and give an introduction to its use for readers interested in running further backtests on their own.
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HENDERSON, VICKY, DAVID HOBSON, and GLENN KENTWELL. "A NEW CLASS OF COMMODITY HEDGING STRATEGIES: A PASSPORT OPTIONS APPROACH." International Journal of Theoretical and Applied Finance 05, no. 03 (May 2002): 255–78. http://dx.doi.org/10.1142/s0219024902001390.
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We provide a new way of hedging a commodity exposure which eliminates downside risk without sacrificing upside potential. The tool used is a variant on the equity passport option and can be used with both futures and forwards contracts as the underlying hedge instrument. Results are given for popular commodity price models such as Gibson-Schwartz and Black with convenience yield. Two different scenarios are considered, one where the producer places his usual hedge and undertakes additional trading, and the other where the usual hedge is not held. In addition, a comparison result is derived showing that one scenario is always more expensive than the other. The cost of these methods are compared to buying a put option on the commodity.
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Łamasz, Bartosz, and Natalia Iwaszczuk. "The Impact of Implied Volatility Fluctuations on Vertical Spread Option Strategies: The Case of WTI Crude Oil Market." Energies 13, no. 20 (October 13, 2020): 5323. http://dx.doi.org/10.3390/en13205323.
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This paper aims to analyze the impact of implied volatility on the costs, break-even points (BEPs), and the final results of the vertical spread option strategies (vertical spreads). We considered two main groups of vertical spreads: with limited and unlimited profits. The strategy with limited profits was divided into net credit spread and net debit spread. The analysis takes into account West Texas Intermediate (WTI) crude oil options listed on New York Mercantile Exchange (NYMEX) from 17 November 2008 to 15 April 2020. Our findings suggest that the unlimited vertical spreads were executed with profits less frequently than the limited vertical spreads in each of the considered categories of implied volatility. Nonetheless, the advantage of unlimited strategies was observed for substantial oil price movements (above 10%) when the rates of return on these strategies were higher than for limited strategies. With small price movements (lower than 5%), the net credit spread strategies were by far the best choice and generated profits in the widest price ranges in each category of implied volatility. This study bridges the gap between option strategies trading, implied volatility and WTI crude oil market. The obtained results may be a source of information in hedging against oil price fluctuations.
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Chen, An-Sing, and Mark T. Leung. "Option straddle trading: Financial performance and economic significance of direct profit forecast and conventional strategies." Applied Economics Letters 10, no. 8 (June 2003): 493–98. http://dx.doi.org/10.1080/1350485032000095375.
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Hübner, Georges. "Option replication and the performance of a market timer." Studies in Economics and Finance 33, no. 1 (March 7, 2016): 2–25. http://dx.doi.org/10.1108/sef-01-2015-0012.
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Purpose – The Treynor and Mazuy framework is a widely used return-based model of market timing. However, existing corrections to the regression intercept can be manipulated through derivatives trading. Because they are conceptually flawed, these corrections produce biased performance measures. This paper aims to get back to Henriksson and Merton’s initial idea of option replication to overcome this issue and adapt the market timing model to various kinds of trading strategies and return-generating processes. Design/methodology/approach – This paper proposes a theoretical adjustment based on Merton’s option replication approach adapted to the Treynor and Mazuy specification. The linear and quadratic coefficients of the regression are exploited to assess the cost of the replicating option that yields similar convexity for a passive portfolio. A similar reasoning applies for various timing patterns and in multi-factor models. Findings – The proposed framework induces a potential rebalancing risk and involves the delicate issue of choosing the cheapest option. This paper shows that these issues can be overcome for reasonable tolerance levels. The option replication approach is a workable approach for practical applications. Originality/value – The adaptation of Merton’s reasoning to the Treynor and Mazuy model has surprisingly never been proposed so far. This paper has the potential to correct for a pervasive bias in the estimation of the performance of a market timer in the context of this very popular quadratic regression setup. Because of the power of the option replication approach, the reasoning is shown to be applicable to multi-factor models, negative timing and market neutral strategies. This paper could fuel empirical studies that would shed new light on the genuine market timing skills of active portfolio managers.
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Machado-Santos, Carlos. "Portfolio insurance using traded options." Revista de Administração Contemporânea 5, no. 3 (December 2001): 187–214. http://dx.doi.org/10.1590/s1415-65552001000300010.
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Literature concerning the institutional use of options indicates that the main purpose of option trading is to provide investors with the opportunity to create return distributions previously unavailable, considering that options provide the means to manipulate portfolio returns. In such a context, this study intends to analyse the returns of insured portfolios generated by hedging strategies on underlying stock portfolios. Because dynamic hedging is too expensive, we have hedged the stock positions discretely, in a way that the positions were revised only when the daily hedge ratio has changed more than a specific amount. The results, provided by these hedging schemes, indicate that a small rise of the standard deviation seems to be largely compensated with the higher average returns. In fact, such strategies seem to be highly influenced by the price movements of underlying stocks, requiring more frequent (sparse) adjustments in periods of high (low) volatility. Thus, discrete hedging strategies seem more accurate and meaningful than the arbitrary regular intervals largely presented and discussed in literature.
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Grobys, Klaus, and Sami Vähämaa. "Another look at value and momentum: volatility spillovers." Review of Quantitative Finance and Accounting 55, no. 4 (April 8, 2020): 1459–79. http://dx.doi.org/10.1007/s11156-020-00880-2.
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Abstract This paper examines volatility interdependencies between value and momentum returns. Using U.S. data over the period 1926–2015, we document persistent periods of low and high volatility spillovers between value and momentum strategies. Moreover, we find that the intensity of the volatility spillovers may change substantially in very short periods of time and that these shifts in spillover intensity can be linked to prominent economic events and financial market turmoil. Our results further demonstrate that value returns increase and momentum returns decrease monotonically with increasing volatility spillovers between the two strategies. Given this linkage between spillover intensity and returns, we propose a simple trading strategy which utilizes a volatility spillover index for allocating funds between value and momentum portfolios. The proposed trading strategy outperforms value and momentum strategies and generates payoffs that are not subject to option-like behavior.
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Song, Hyounggun, Sung Kwon Han, Seung Hwan Jeong, Hee Soo Lee, and Kyong Joo Oh. "Using Genetic Algorithms to Develop a Dynamic Guaranteed Option Hedge System." Sustainability 11, no. 15 (July 29, 2019): 4100. http://dx.doi.org/10.3390/su11154100.
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In this research, we develop a guaranteed option hedge system to protect against capital market risks using a genetic algorithm (GA). We test the hedge effectiveness of our guaranteed option hedge strategy by comparing the performance of our system with those of other strategies. A genetic algorithm heuristic trading method for the optimization of a non-linear problem is applied to each system to improve the hedge effectiveness. The GA dynamic hedge system developed in this research is found to improve hedge effectiveness by reducing the option value volatility and increasing the total profit. Insurance companies are able to make more efficient investment strategies by using our guaranteed option hedge system. It contributes to the investment efficiency of the insurance companies and helps to achieve efficiency for financial markets. In addition, it helps to achieve sustained economic benefits to policyholders. In this sense, the system developed in this paper plays a role in sustaining economic growth.
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Смирнов, Сергей Николевич, and Sergey Smirnov. "A guaranteed deterministic approach to superhedging: mixed strategies and game equilibrium." Mathematical Game Theory and Applications 12, no. 1 (March 30, 2020): 60–90. http://dx.doi.org/10.17076/mgta_2020_1_11.
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For a discrete-time superreplication problem, a guaranteed deterministic formulation is considered: the problem is to ensure a cheapest coverage of the contingent claim on an option under all scenarios which are set using a priori defined compacts, depending on the price history: price increments at each moment of time must lie in the corresponding compacts. The market is considered with trading constraints and without transaction costs. The statement of the problem is game-theoretic in nature and leads directly to the Bellman - Isaacs equations. In this article, we introduce a mixed extension of the ``market'' pure strategies. Several results concerning game equilibrium are obtained.
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Li, Haitao, Yuewu Xu, and Xiaoyan Zhang. "Hedge Fund Performance Evaluation under the Stochastic Discount Factor Framework." Journal of Financial and Quantitative Analysis 51, no. 1 (February 2016): 231–57. http://dx.doi.org/10.1017/s0022109016000120.
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AbstractWe study hedge fund performance evaluation under the stochastic discount factor framework of Farnsworth, Ferson, Jackson, and Todd (FFJT). To accommodate dynamic trading strategies and derivatives used by hedge funds, we extend FFJT’s approach by considering models with option and time-averaged risk factors and incorporating option returns in model estimation. A wide range of models yield similar conclusions on the performance of simulated long/short equity hedge funds. We apply these models to 2,315 actual long/short equity funds from the Lipper TASS database and find that a small portion of these funds can outperform the market.
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Sattarov, Otabek, Azamjon Muminov, Cheol Won Lee, Hyun Kyu Kang, Ryumduck Oh, Junho Ahn, Hyung Jun Oh, and Heung Seok Jeon. "Recommending Cryptocurrency Trading Points with Deep Reinforcement Learning Approach." Applied Sciences 10, no. 4 (February 22, 2020): 1506. http://dx.doi.org/10.3390/app10041506.
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The net profit of investors can rapidly increase if they correctly decide to take one of these three actions: buying, selling, or holding the stocks. The right action is related to massive stock market measurements. Therefore, defining the right action requires specific knowledge from investors. The economy scientists, following their research, have suggested several strategies and indicating factors that serve to find the best option for trading in a stock market. However, several investors’ capital decreased when they tried to trade the basis of the recommendation of these strategies. That means the stock market needs more satisfactory research, which can give more guarantee of success for investors. To address this challenge, we tried to apply one of the machine learning algorithms, which is called deep reinforcement learning (DRL) on the stock market. As a result, we developed an application that observes historical price movements and takes action on real-time prices. We tested our proposal algorithm with three—Bitcoin (BTC), Litecoin (LTC), and Ethereum (ETH)—crypto coins’ historical data. The experiment on Bitcoin via DRL application shows that the investor got 14.4% net profits within one month. Similarly, tests on Litecoin and Ethereum also finished with 74% and 41% profit, respectively.
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CARR, PETER. "SEMI-STATIC HEDGING OF BARRIER OPTIONS UNDER POISSON JUMPS." International Journal of Theoretical and Applied Finance 14, no. 07 (November 2011): 1091–111. http://dx.doi.org/10.1142/s0219024911006668.
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We show that the payoff to barrier options can be replicated when the underlying price process is driven by the difference of two independent Poisson processes. The replicating strategy employs simple semi-static positions in co-terminal standard options. We note that classical dynamic replication using just the underlying asset and a riskless asset is not possible in this context. When the underlying of the barrier option has no carrying cost, we show that the same semi-static trading strategy continues to replicate even when the two jump arrival rates are generalized into positive even functions of distance to the barrier and when the clock speed is randomized into a positive continuous independent process. Since the even function and the positive process need no further specification, our replicating strategies are also semi-robust. Finally, we show that previous results obtained for continuous processes arise as limits of our analysis.
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Tan, Teik-Kheong, and Merouane Lakehal-Ayat. "A big data Bayesian approach to earnings profitability in the S&P 500." PSU Research Review 2, no. 1 (March 15, 2018): 35–58. http://dx.doi.org/10.1108/prr-04-2017-0023.
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Purpose The impact of volatility crush can be devastating to an option buyer and results in a substantial capital loss, even with a directionally correct strategy. As a result, most volatility plays are for option sellers, but the profit they can achieve is limited and the sellers carry unlimited risk. This paper aims to demonstrate the dynamics of implied volatility (IV) as being influenced by effects of persistence, leverage, market sentiment and liquidity. From the exploratory factor analysis (EFA), they extract four constructs and the results from the confirmatory factor analysis (CFA) indicated a good model fit for the constructs. Design/methodology/approach This section describes the methodology used for conducting the study. This includes the study area, study approach, sources of data, sampling technique and the method of data analysis. Findings Although there is extensive literature on methods for estimating IV dynamics during earnings announcement, few researchers have looked at the impact of expected market maker move, IV differential and IV Rank on the IV path after the earnings announcement. One reason for this research gap is because of the recent introduction of weekly options for equities by the Chicago Board of Options Exchange (CBOE) back in late 2010. Even then, the CBOE only released weekly options four individual equities – Bank of America (BAC.N), Apple (AAPL.O), Citigroup (C.N) and US-listed shares of BP (BP.L) (BP.N). The introduction of weekly options provided more trading flexibility and precision timing from shorter durations. This automatically expanded expiration choices, which in turned offered greater access and flexibility from the perspective of trading volatility during earnings announcement. This study has demonstrated the impact of including market sentiment and liquidity into the forecasting model for IV during earnings. This understanding in turn helps traders to formulate strategies that can circumvent the undefined risk associated with trading options strategies such as writing strangles. Research limitations/implications The first limitation of the study is that the firms included in the study are relatively large, and the results of the study can therefore not be generalized to medium sized and small firms. The second limitation lies in the current sample size, which in many cases was not enough to be able to draw reliable conclusions on. Scaling the sample size up is only a function of time and effort. This is easily overcome and should not be a limitation in the future. The third limitation concerns the measurement of the variables. Under the assumption of a normal distribution of returns (i.e. stock prices follow a random walk process), which means that the distribution of returns is symmetrical, one can estimate the probabilities of potential gains or losses associated with each amount. This means the standard deviation of securities returns, which is called historical volatility and is usually calculated as a moving average, can be used as a risk indicator. The prices used for the calculations are usually the closing prices, but Parkinson (1980) suggests that the day’s high and low prices would provide a better estimate of real volatility. One can also refine the analysis with high-frequency data. Such data enable the avoidance of the bias stemming from the use of closing (or opening) prices, but they have only been available for a relatively short time. The length of the observation period is another topic that is still under debate. There are no criteria that enable one to conclude that volatility calculated in relation to mean returns over 20 trading days (or one month) and then annualized is any more or less representative than volatility calculated over 130 trading days (or six months) and then annualized, or even than volatility measured directly over 260 trading days (one year). Nonetheless, the guidelines adopted in this study represent the best practices of researchers thus far. Practical implications This study has indicated that an earnings announcement can provide a volatility mispricing opportunity to allow an investor to profit from a sudden, sharp drop in IV. More specifically, the methodology developed by Tan and Bing is now well supported both empirically and theoretically in terms of qualifying opportunities that can be profitable because of the volatility crush. Conventionally, the option strategy of shorting strangles carries unlimited theoretical risk; however, the methodology has demonstrated that this risk can be substantially reduced if followed judiciously. This profitable strategy relies on a set of qualifying parameters including liquidity, premium collection, volatility differential, expected market move and market sentiment. Building upon this framework, the understanding of the effects of persistence and leverage resulted in further reducing the risk associated with trading options during earnings announcements. As a guideline, the sentiment and liquidity variables help to qualify a trade and the effects of persistence and leverage help to close the qualified trade. Social implications The authors find a positive association between the effects of market sentiment, liquidity, persistence and leverage in the dynamics of IV during earnings announcement. These findings substantiate further the four factors that influence IV dynamics during earnings announcement and conclude that just looking at persistence and leverage alone will not generate profitable trading opportunities. Originality/value The impact of volatility crush can be devastating to the option buyer with substantial capital loss, even for a directionally correct strategy. As a result, most volatility plays are for option sellers; however, the profit is limited and the sellers carry unlimited risk. The authors demonstrate the dynamics of IV as being influenced by effects of persistence, leverage, market sentiment and liquidity. From the EFA, they extracted four constructs and the results from the CFA indicated a good model fit for the constructs. Using EFA, CFA and Bayesian analysis, how this model can help investors formulate the right strategy to achieve the best risk/reward mix is demonstrated. Using Bayesian estimation and IV differential to proxy for differences of opinion about term structures in option pricing, the authors find a positive association among the effects of market sentiment, liquidity, persistence and leverage in the dynamics of IV during earnings announcement.
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Muzzioli, Silvia. "The Information Content of Option-Based Forecasts of Volatility: Evidence from the Italian Stock Market." Quarterly Journal of Finance 03, no. 01 (March 2013): 1350005. http://dx.doi.org/10.1142/s2010139213500055.
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The aim of this paper is to comprehensively compare option-based measures of volatility, with the ultimate plan of devising a new volatility index for the Italian stock market. The performance of the different implied volatility measures in forecasting future volatility is evaluated both in a statistical and in an economic setting. The properties of the implied volatility measures are also explored, by looking at both the contemporaneous relationship between implied volatility changes and market returns and the usefulness of the proposed index in forecasting future market returns. The results of the paper are of practical importance for both policy-makers and investors. The volatility index, based on corridor measures, could be used to forecast market volatility, for value at risk purposes, in order to determine trading strategies on the underlying index and as an early warning for future market conditions.
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Lim, Hyuncheul, and Youngsoo Choi. "Knock-In and Stocks Market Effect Due to ELS Issuance and Hedging." Journal of Derivatives and Quantitative Studies 23, no. 2 (May 31, 2015): 289–321. http://dx.doi.org/10.1108/jdqs-02-2015-b0006.
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In this paper we analyze the shortfall risk implied in the auto call step down equity linked securities (ELS) based on two underlying assets, which is a major product of the rapidly growing ELS market as the low interest rate environment continues. And we also present the hedging strategies for managing shortfall risk. In the position of auto call step down ELS issuer, 1) until the underlying asset price reaches at knock-in (KI) level, the delta of the underlying is continually and significantly increased in order to hedge the short position of the Down and Out (DO) option and the long position of the put option inherent in ELS, 2) however, the hedger must reduce this delta as soon as the underperformed underlying price touches KI level, which triggers the vanishing of the DO option. As a way to manage these shortfall risks, this paper proposes two new hedging strategies of minimizing these shortfall risks and depending on the KI probability. Also this paper shows that these hedging strategies provide better performance than traditional BS hedging strategy when these hedging strategies are applied to a sample product with real market data. As the policy proposals, first, in order to prevent the concentration of the KI prices, ELS issue amount based on the same underlying is needed to be determined in consideration of both the average market trading volume and maximum leverage delta. Second, in the realm of pin risk such as Knock-In or Knock-Out, where the leverage increases, it is recommended to mitigate the risk management delta limit based on the BS model which is made under the assumption of continuous hedging infinitesimally.
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Souissi, Nessim. "The Implied Risk Neutral Density Dynamics: Evidence from the S&P TSX 60 Index." Journal of Applied Mathematics 2017 (2017): 1–10. http://dx.doi.org/10.1155/2017/3156250.
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The risk neutral density is an important tool for analyzing the dynamics of financial markets and traders’ attitudes and reactions to already experienced shocks by financial markets as well as the potential ones. In this paper, we present a new method for the extraction information content from option prices. By eliminating bias caused by daily variation of contract maturity through a completely nonparametric technique based on kernel regression, we allow comparing evolution of risk neutral density and extracting from time continuous indicators that detect evolution of traders’ attitudes, risk perception, and belief homogeneity. This method is useful to develop trading strategies and monetary policies.
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Kang, Tae-Hun, and Myung-Chul Lee. "The Martingale Restriction and Relative Market Efficiency between KOSPI 200 Index and Index Options Market." Journal of Derivatives and Quantitative Studies 23, no. 3 (August 31, 2015): 367–89. http://dx.doi.org/10.1108/jdqs-03-2015-b0003.
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This paper examines the martingale restriction for the KOSPI 200 index options market. And in cases of the rejections, we investigate the relative market efficiency between stock index and stock index options market, using approximate entropy (ApEn) method proposed by Pincus (1994), which quantifies a complexity, irregularity and unpredictability in time series. The empirical results of this study clearly reject the martingale restriction and regression analyses indicate that the historical returns of underlying index can explain about 25% of the price differences between option-implied and market index prices but the total trading volume can explain only a small portion of the price differences. These results have cast doubt on the informational efficiency of this market. Comparing the relative market efficiency based on ApEn have showed that the complexity or irregularity of KOSPI 200 index is larger than the index options during the entire sample period. But, Examining separately ApEn of the magnitude and the sign time series which compose log-returns document that stock index options market reflect more efficiently the information about the direction of price changes than the stock index market in 2014 and the efficiency of the index options market about the directional information may be affected by directional traders who prefer certain strategies designed by exploiting past stock market movements.
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Nawaz, Ahmad, Muhammad Farooq, Faisal Nadeem, Kadambot H. M. Siddique, and Rattan Lal. "Rice–wheat cropping systems in South Asia: issues, options and opportunities." Crop and Pasture Science 70, no. 5 (2019): 395. http://dx.doi.org/10.1071/cp18383.
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The rice (Oryza sativa L.)–wheat (Triticum aestivum L.) cropping system is the largest agricultural production system worldwide, and is practised on 24 Mha in Asia. Many factors have threatened the long-term sustainability of conventional rice–wheat cropping systems, including degradation of soil health, water scarcity, labour/energy crises, nutrient imbalances, low soil organic matter contents, complex weed and insect flora, the emergence of herbicide-resistant weeds, and greenhouse-gas emissions. Options for improving the yield and sustainability of the rice–wheat cropping system include the use of resource-conservation technologies such as no-till wheat, laser-assisted land levelling, and direct-seeded aerobic rice. However, these technologies are site- and situation-specific; for example, direct-seeded aerobic rice is successful on heavy-textured soils but not sandy soils. Other useful strategies include seed priming, carbon trading and payment, the inclusion of legumes, and eco-friendly and biological methods of weed control. Irrigation based on soil matric potential using tensiometers can be useful for saving surplus water in direct-seeded, aerobic rice. These options and strategies will contribute to resolving water scarcity, saving labour and energy resources, reducing greenhouse-gas emissions, increasing soil organic matter contents, and improving the soil-quality index. Seed priming with various substances that supplement osmotic pressure (osmotica) is a viable option for addressing poor stand establishment in conservation rice–wheat cropping systems and for increasing crop yields. To strengthen the campaign for using resource-conservation technologies in rice–wheat cropping systems, carbon-payment schemes could be introduced and machinery should be offered at affordable prices. The persistent issue of burning crop residues could be resolved by incorporating these residues into biogas/ethanol and biochar production. Because rice and wheat are staple foods in South Asia, agronomic biofortification is a useful option for enhancing micronutrient contents in grains to help to reduce malnutrition.
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Z.A.B, Zian Ibnu, and Karmilasari Karmilasari. "IMPLEMENTATION OF MULTICRITERIA MOVING AVERAGE CROSSOVER INDICATORS AS THE BASIS FOR TECHNICAL ANALYSIS DECISION MAKING AT THE FUTURES EXCHANGE." Jurnal Manajemen Indonesia 19, no. 2 (August 30, 2019): 160. http://dx.doi.org/10.25124/jmi.v19i2.1621.
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The purpose of this paper is to minimize the risk of trading option and futures through conducting technical analysis utilizing Double Crossover Method. Hence, it tries to seek the answer on some problems including trading foreign exchange without having to make official and uncomplicated investments, trading without having to spend a lot of time, testing double crossover methods in a short time, and how to determine the most effective double crossover methods with multi-criteria considerations. This research utilized both Backtesting and Analytical Hierarchy Process (AHP) methods. Based on the results of these stages, it was found that MT4 FXDD, SMA 5 - 10 pairs on H4 Timeframes, Expert Advisors, and Back testing were the answers to the existing problems. For general investors, this strategies support their activities on getting real and efficient foreign exchange trading facilities without joining procedural and official investments in the futures exchange.Efficient decision makers tools can be utilized in trading to avoid or minimize the loss by6applying the most effective double crossover method priority used as a technical analysis in trading foreign exchange based on test results. Trading foreign exchange previously was utilizing single lines moving average that has some waeknesses. This study tries to shed the light of double crossover method, utilizing two lines of moving averages to generate trading signals effectively and accurately in minimizing loss.
Keywords—F31 Foreign Exchange, G13 Futures Pricing, F17 Trade Forecasting and Simulation, E22 Investment
Abstrak
Artikel ini bertujuan untuk meminimalkan risiko trading option and futures melalui penggunaan analisis teknis dengan menggunakan Metode Double Crossover. Oleh karena itu, penelitian ini mencoba mencari jawaban pada beberapa masalah terkait dengan hal berikut yaitu: bagaimana melakukan perdagangan valuta asing tanpa harus melakukan investasi resmi dan tidak rumit, bagaimana melakukan perdagangan tanpa harus menghabiskan banyak waktu, bagaimana menguji metode Double Crossover dalam waktu singkat, dan bagaimana menentukan metode Double Cross over yang paling efektif dengan pertimbangan multi-kriteria. Penelitian ini menggunakan metode Backtesting dan Analytical Hierarchy Process (AHP). Berdasarkan hasil penelitian ditemukan bahwa jawaban dari masalah yang dicari dalam penelitian ini secara berurutan yaitu menggunakan aplikasi MT4 FXDD, SMA 5 - 10 pasang pada H4 Timeframes, Expert Advisors, dan Backtesting. Hasil penelitian ini dapat dimanfaatkan oleh investor umum karena strategi ini mendukung kegiatan mereka dalam mendapatkan fasilitas perdagangan valuta asing yang nyata dan efisien tanpa bergabung dengan investasi resmi dan penuh prosedural di bursa berjangka. Selanjutnya, Alat pembuat keputusan yang efisien dapat dimanfaatkan oleh investor untuk menghindari atau meminimalkan kerugian dengan menerapkan prioritas metode double crossover paling efektif yang digunakan sebagai analisis teknis dalam perdagangan valuta asing berdasarkan hasil tes. Pengambilan keputusan dalam perdagangan valuta asing sebelumnya hanya mengacu pada penggunakan garis tunggal Moving average yang memiliki kelemahan. Studi ini mencoba untuk menjelaskan metode double crossover, yaitu metode yang memanfaatkan dua garis moving average untuk menghasilkan sinyal perdagangan secara efektif dan akurat dalam pengambilan keputusan dan meminimalkan kerugian.
Kata Kunci— Valuta Asing (F31), Harga Saham (G13), Perkiraan dan Simulasi Perdagangan (F17), Investasi (E22)
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Al Bahsan, Zian Ibnu Zain Al Abidin, and Karmilasari Karmilasari. "IMPLEMENTATION OF MULTI-CRITERIA MOVING AVERAGE CROSSOVER INDICATORS AS THE BASIS FOR TECHNICAL ANALYSIS DECISION MAKING AT THE FUTURES EXCHANGE." Jurnal Manajemen Indonesia 19, no. 1 (May 21, 2019): 91. http://dx.doi.org/10.25124/jmi.v19i1.1988.
Full textAbstract:
The purpose of this paper is to minimize the risk of trading option and futures through conducting technical analysis utilizing Double Crossover Method. Hence, it tries to seek the answer on some problems such as: foreign exchange tradingwithout having to make official and uncomplicated investments, trading without having to spend a lot of time, testing double crossover methods in a short time, and how to determine the most effective double crossover methods with multi-criteria considerations. Four methods were used which included the review, pre-testing, testing, and drawing conclusions. Based on the results of these stages, it was found that MT4 FXDD, SMA 5 - 10 pairs on H4 Timeframes, Expert Advisors, and Backtesting were the answers to the existing problems. Based on the aforementioned results, there are some suggestion for general investors, this strategies support their activities on getting real and efficient foreign exchange trading facilities without Joining procedural and official investments in the futures exchange; utilizing efficient decision makers tools in trading to avoid or minimize the loss, applying the most effective Double Crossover Method priority used as a technical analysis in trading foreign exchange based on test results. At last, this study explains the application of the double crossover method, which is a method that utilizes two moving average lines to generate a more effective and accurate trading signal for making decision and minimizes losses compared to the use of a single moving average.
Keywords—F31 Foreign Exchange; G13 Futures Pricing; F17 Trade Forecasting and Simulation; E22 Investment.
Abstrak
Tujuan dari artikel ini yaitu untuk meminimalkan risiko trading option and futures melalui penggunaan analisis teknis dengan menggunakan Metode Double Crossover. Oleh karena itu, penelitian ini mencoba mencari jawaban pada beberapa masalah terkait dengan hal berikut yaitu: bagaimana melakukan perdagangan valuta asing tanpa harus melakukan investasi resmi dan tidak rumit, bagaimana melakukan perdagangan tanpa harus menghabiskan banyak waktu, bagaimana menguji metode Double Crossover dalam waktu singkat, dan bagaimana menentukan metode Double Crossoveryang paling efektif dengan pertimbangan multi-kriteria. Empat metode digunakan yang meliputi tinjauan, pra-pengujian, pengujian, dan menarik kesimpulan. Berdasarkan hasil dari tahap-tahap ini, ditemukan bahwa jawaban dari masalah yang dicari dalam penelitian ini secara berurutan yaitu menggunakanaplikasi MT4 FXDD, SMA 5 - 10 pasang pada H4 Timeframes, Expert Advisors, dan Backtesting adalah. Berdasrakan hasil diatas, ada beberapa saran bagi investor atau masyarakat umum, strategi ini mendukung kegiatan mereka dalam mendapatkan fasilitas perdagangan valuta asing yang nyata dan efisien tanpa bergabung dengan investasi resmi dan penuh prosedural di bursa berjangka; Memanfaatkan alat pembuat keputusan yang efisien dalam perdagangan untuk menghindari atau meminimalkan kerugian, menerapkan prioritas Metode Double Crossover paling efektif yang digunakan sebagai analisis teknis dalam perdagangan valuta asing berdasarkan hasil tes. Nilai terpenting dari penelitian ini menjelaskan penggunaan metode double crossover, yaitu metode yang memanfaatkan dua garis moving average untuk menghasilkan sinyal perdagangan yang lebih efektif dan akurat dalam pengambilan keputusan dan meminimalkan kerugian dibandingkan dengan penggunaan single moving average.
Kata Kunci— Valuta Asing (F31); Harga Saham (G13); Perkiraan dan Simulasi Perdagangan (F17); Investasi (E22).
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Atănăsoae, Pavel. "The Operating Strategies of Small-Scale Combined Heat and Power Plants in Liberalized Power Markets." Energies 11, no. 11 (November 10, 2018): 3110. http://dx.doi.org/10.3390/en11113110.
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Distributed generation is a good option for future energy systems with respect to sustainable development. In this context, the small-scale combined heat and power (CHP) plants are seen as an efficient way to reduce greenhouse gas emissions due to lower fuel consumption compared to the separate generation of the heat and electricity. The objective of this paper is to establish operating strategies of the small-scale CHP plants to reduce operational cost and increase revenue in liberalized electricity markets. It analyzes a cogeneration plant with organic Rankine cycle and biomass fuel under the conditions of the Romanian electricity market and the green certificates support scheme for electricity generated in high efficiency cogeneration and from renewable sources. The main finding is that choosing an appropriate mode of operation and using correlated prices of heat and electricity can increase the trading profitability of a CHP plant in liberalized power markets. This can be done by an analysis of the particularities and the specific operating conditions of the CHP plant. The results show that the operating strategies of the CHP plant can yield substantial net revenues from electricity and heat sales. The CHP plant can be economically operated to a useful heat load of more than 40% when operating strategies are applied.
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Borgeaud, Christèle, Alessandra Schnider, Michael Krützen, and Redouan Bshary. "Female vervet monkeys fine-tune decisions on tolerance versus conflict in a communication network." Proceedings of the Royal Society B: Biological Sciences 284, no. 1867 (November 15, 2017): 20171922. http://dx.doi.org/10.1098/rspb.2017.1922.
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Group living promotes opportunities for both cooperation and competition. Selection on the ability to cope with such opposing social opportunities has been proposed as a driving force in the evolution of large brains in primates and other social species. However, we still know little about the degree of complexity involved in such social strategies. Here, we report advanced social strategies in wild vervet monkeys. Building on recent experimental evidence that subordinate females trade grooming for tolerance from higher-ranking individuals during foraging activities, we show that the audience composition strongly affects this trade. First, tolerance was lower if the audience contained individuals that outranked the subordinate partner, independently of audience size and kinship relationships. Second, we found a significant interaction between previous grooming and relative rank of bystanders: dominant subjects valued recent grooming by subordinates while intermediate ranked subjects valued the option to aggress subordinate partners in the presence of a dominant audience. Aggressors were also more likely to emit coalition recruitment calls if the audience contained individuals that outranked the subordinate partner. In conclusion, vervet monkeys include both recent grooming and knowledge about third-party relationships to make complex decisions when trading grooming for tolerance, leading to a finely balanced trade-off between reciprocation and opportunities to reinforce rank relationships.
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BENTH, FRED ESPEN, and FRANK PROSKE. "UTILITY INDIFFERENCE PRICING OF INTEREST-RATE GUARANTEES." International Journal of Theoretical and Applied Finance 12, no. 01 (February 2009): 63–82. http://dx.doi.org/10.1142/s0219024909005117.
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We consider the problem of utility indifference pricing of a put option written on a non-tradeable asset, where we can hedge in a correlated asset. The dynamics are assumed to be a two-dimensional geometric Brownian motion, and we suppose that the issuer of the option have exponential risk preferences. We prove that the indifference price dynamics is a martingale with respect to an equivalent martingale measure (EMM) Q after discounting, implying that it is arbitrage-free. Moreover, we provide a representation of the residual risk remaining after using the optimal utility-based trading strategy as the hedge. Our motivation for this study comes from pricing interest-rate guarantees, which are products usually offered by companies managing pension funds. In certain market situations the life company cannot hedge perfectly the guarantee, and needs to resort to sub-optimal replication strategies. We argue that utility indifference pricing is a suitable method for analysing such cases. We provide some numerical examples giving insight into how the prices depend on the correlation between the tradeable and non-tradeable asset, and we demonstrate that negative correlation is advantageous, in the sense that the hedging costs become less than with positive correlation, and that the residual risk has lower volatility. Thus, if the insurance company can hedge in assets negatively correlated with the pension fund, they may offer cheaper prices with lower Value-at-Risk measures on the residual risk.
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Nga, Nguyen Thi Quynh, and Đỗ Hồng Vân. "The impacts of customer satisfaction on loyalty of the youth (18-25 years old) towards e-commerce trading floors in Ho Chi Minh City." Science & Technology Development Journal - Economics - Law and Management 4, no. 4 (October 22, 2020): First. http://dx.doi.org/10.32508/stdjelm.v4i4.654.
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The booming of E-commerce trading sites, especially after COVID-19, has aggressively put pressure on the competition in this industry. Hence, building young customers’ loyalty plays a vital role in doing business. One of the best solutions to this problem is to boost customer satisfaction. As customers are satisfied with the products or services provided, they tend to purchase more frequently and eventually become more loyal. Regarding location, HCM City is currently the most potential market for E-commerce development. Therefore, the aim of this paper is to weigh the relative impacts of customer satisfaction factors on the youth’s loyalty (18-25 years old) to E-commerce trading sites in HCM City, address the existing issues, and propose the corresponding solutions. The study used Multiple Linear Regression Analysis with SPSS 20.0 to build, examine, and test the research model through 215 samples indicates that there are five factors, which affect the youth’s loyalty. They are the satisfaction of website design, the satisfaction of the product portfolio, the satisfaction of privacy & security, the satisfaction of delivery, and the satisfaction of the post-sales service. The results reveal that the satisfaction of privacy & security is the most influential factor in the youth’s loyalty, followed by the satisfaction of the post-sales service and the satisfaction of website design. In addition, there are no differences in young customers’ loyalty regardless of genders, occupations, frequencies of visiting E-commerce sites, monthly income levels, and average spending per order. Accordingly, these findings can be good guidance for E-commerce trading sites to formulate suitable development strategies to build the loyalty of customers at the early stage (18-25 years old) and effectively compete in the market. On the other hand, the paper has certain limitations, namely the short duration of collecting primary data (one month) and thus the relatively small sample size compared to the whole population of the youth. Moreover, as the method of data collection is survey-based, the study must be remade for different regions and nations. Also, this paper only covers E-commerce trading sites within the retailing industry. Hence, future research can greatly improve the model by extending the time period of data collection and covering more industries. Besides, a more modern approach such as SEM is a decent option for measurement scales evaluation and model testing, since Multiple Linear Regression Analysis requires strict assumptions and may have a great likelihood of measurement errors.
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Gregoriou, Greg, François-Éric Racicot, and Raymond Théoret. "The q-factor and the Fama and French asset pricing models: hedge fund evidence." Managerial Finance 42, no. 12 (December 5, 2016): 1180–207. http://dx.doi.org/10.1108/mf-01-2016-0034.
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Purpose The purpose of this paper is to test the new Fama and French (2015) five-factor model relying on a thorough sample of hedge fund strategies drawn from the Barclay’s Global hedge fund database. Design/methodology/approach The authors use a stepwise regression to identify the factors of the q-factor model which are relevant for the hedge fund strategy analysis. Doing so, the authors account for the Fung and Hsieh seven factors which prove very useful in the explanation of the hedge fund strategies. The authors introduce interaction terms to depict any interaction of the traditional Fama and French factors with the factors associated with the q-factor model. The authors also examine the dynamic dimensions of the risk-taking behavior of hedge funds using a BEKK procedure and the Kalman filter algorithm. Findings The results show that hedge funds seem to prefer stocks of firms with a high investment-to-assets ratio (low conservative minus aggressive (CMA)), on the one hand, and weak firms’ stocks (low robust minus weak (RMW)), on the other hand. This combination is not associated with the conventional properties of growth stocks – i.e., low high minus low (HML) stocks – which are related to firms which invest more (low CMA) and which are more profitable (high RMW). Finally, small minus big (SMB) interacts more with RMW while HML is more correlated with CMA. The conditional correlations between SMB and CMA, on the one hand, and HML and RMW, on the other hand, are less tight and may change sign over time. Originality/value To the best of the authors’ knowledge, the authors are the first to cast the new Fama and French five-factor model in a hedge fund setting which account for the Fung and Hsieh option-like trading strategies. This approach allows the authors to better understand hedge fund strategies because q-factors are useful to study the dynamic behavior of hedge funds.
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Milovidov, V. "Risk Management under Informational Asymmetry: to Differentiate Those Distinguishable." World Economy and International Relations, no. 8 (2015): 14–24. http://dx.doi.org/10.20542/0131-2227-2015-8-14-24.
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The article explores the specifics of dealing with the informational asymmetry. The author reviews various institutional and operational approaches enabling investors to deal with such asymmetry. These include: financial intermediaries, information agencies and advanced information technology, market portfolio and asset pricing modeling, algorithmic financial strategies and high-frequency trading, option strategies as well as personalized portfolio selection based on perspective assumptions theory. All of them could help investors to minimize the risks. However, none of them could serve as a comprehensive solution. Moreover, in practice they produce additional risks and conflicts of interest. The most known example is principal-agent problem. Under these circumstances one of the key investor’s goal is to increase his own ability to deal with informational asymmetry and market uncertainty. That is, investor wants to acquire a greater sense for choosing proactive risk management strategy and for not be fooled by randomness. Author believes that cause-effect relation drives most of all market events. How to deal with uncertainty and informational asymmetry while assuming that investor’s ability to collect and process all existed information is limited? It would be worth for any investor (or, broadly speaking, for any kind of economic actors) to focus their attention to the most meaningful informational signals or events which differ markedly from others. It is also suggested that such events may cause further meaningful effects. To define such informational signals author refers to well known “butterfly effect”. Similarly to the meteorological exponentially developing processes, in economic and social sphere we may find Exponentially Scalable Events, or ESE. ESE is meaningful informational event, which catalyzes significant changes in human economic and social life. Investor’s capability to recognize ESE helps to predict and properly assess the potential market fluctuations, thus to reduce long-term risks.
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V, Ramasamy, and G. Prabakaran. "OPTIMAL TRADING STRATEGIES AND PERFORMANCE OF OPTIONS AT NSE." International Journal of Advanced Research 6, no. 5 (May 31, 2018): 1337–44. http://dx.doi.org/10.21474/ijar01/7164.
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Duppati, Geeta, and Mengying Zhu. "Oil prices changes and volatility in sector stock returns: Evidence from Australia, New Zealand, China, Germany and Norway." Corporate Ownership and Control 13, no. 2 (2016): 351–70. http://dx.doi.org/10.22495/cocv13i2clp4.
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The paper examines the exposure of sectoral stock returns to oil price changes in Australia, China, Germany, New Zealand and Norway over the period 2000-2015 using weekly data drawn from DataStream. The issue of volatility has important implications for the theory of finance and as is well-known accurate volatility forecasts are important in a variety of settings including option and other derivatives pricing, portfolio and risk management (e.g. in the calculation of hedge ratios and Value-at-Risk measures), and trading strategies (David and Ruiz, 2009). This study adopts GARCH and EGARCH to understand the relationship between the returns and volatility. The findings using GARCH (EGARCH) models suggests that in the case of Germany eight (nine) out of ten sectors returns can be explained by the volatility of past oil price in Germany, while in the case of Australia, six (seven) out of ten sector returns are sensitive to the oil price changes with the exception of Industrials, Consumer Goods, Health care and Utilities. While in China and New Zealand five sectors are found sensitive to oil price changes and three sectors in Norway, namely Oil & Gas, Consumer Services and Financials. Secondly, this paper also investigated the exposure of the stock returns to oil price changes using market index data as a proxy using GARCH or EGARCH model. The results indicated that the stock returns are sensitive to the oil price changes and have leverage effects for all the five countries. Further, the findings also suggests that sector with more constituents is likely to have leverage effects and vice versa. The results have implications to market participants to make informed decisions about a better portfolio diversification for minimizing risk and adding value to the stocks.
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Hsieh, Wen-liang G., and Huei-Ru He. "Informed trading, trading strategies and the information content of trading volume: Evidence from the Taiwan index options market." Journal of International Financial Markets, Institutions and Money 31 (July 2014): 187–215. http://dx.doi.org/10.1016/j.intfin.2014.03.012.
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Singh, Vipul Kumar. "Trading derivatives options contracts: the associated risk and potential." Emerald Emerging Markets Case Studies 8, no. 4 (December 4, 2018): 1–22. http://dx.doi.org/10.1108/eemcs-01-2018-0005.
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Learning outcomes It intends to help the learners assess the scenarios of volatility in the Indian capital market which was caused by unpredictable market forces. It also helps in understanding how analysts struggle to predict the direction of the market and what options strategies can be recommended to be deployed by the investors to maximize returns in such compelling scenarios. Case overview/synopsis This case study presents snapshots of high volatilities caused by the market and economic forces in the Indian capital market. It depicts how analysts struggled to predict the direction of the market; and how high volatility can put them in trouble. It also exemplifies as to how by selecting the apt strategies, investors maximize their immediate returns in a volatile period and can produce large returns in a short time. Complexity academic level The best time to discuss the case is during the completion of options strategies in the course of Derivatives or Portfolio/Investment Management. Supplementary materials Teaching Notes are available for educators only. Please contact your library to gain login details or email support@emeraldinsight.com to request teaching notes. Subject code CSS 1: Accounting and Finance.
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Sheu, Her-Jiun, and Yu-Chen Wei. "Effective options trading strategies based on volatility forecasting recruiting investor sentiment." Expert Systems with Applications 38, no. 1 (January 2011): 585–96. http://dx.doi.org/10.1016/j.eswa.2010.07.007.
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Mi, Hui, and Shuguang Zhang. "Dynamic valuation of options on non-traded assets and trading strategies." Journal of Systems Science and Complexity 26, no. 6 (December 2013): 991–1001. http://dx.doi.org/10.1007/s11424-013-1198-2.
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Mutum, Kelvin. "Volatility Forecast Incorporating Investors’ Sentiment and its Application in Options Trading Strategies: A Behavioural Finance Approach at Nifty 50 Index." Vision: The Journal of Business Perspective 24, no. 2 (April 26, 2020): 217–27. http://dx.doi.org/10.1177/0972262920914117.
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The present study was to examine whether the performance of options trading strategies can be improved if volatility forecasting incorporating investors’ sentiment was incorporated in the decision-making process at the Indian options market. The study adopted the multiple-factor model to build the Indian volatility forecasting model. The benchmark forecasting model (BMF) includes absolute daily returns (|RA|), daily high–low range (HLR) and daily realized volatility (RV). The proxies of investors’ sentiment considered in the study were India volatility index (IVIX), advance decline ratio (ADR), put-call open interest (PCOI) and their changes. The results of the causality and regression test indicate that investors’ sentiment and their changes should be included in the forecasting model. Mean absolute percentage error (MAPE) indicates that 15-day holding period shows the minimum error. Straddle strategies were simulated 15 days ahead before the options maturity date base on the direction of the forecast for different volatility forecasting models. The simulation result shows that the options trading performance might be improved if volatility forecasting incorporating investor sentiment, particularly IVIX, was incorporated in the decision-making process at the Indian options market. From the behavioural finance point of view, the study bridges the gap between options trading, volatility forecasting and information content of investors’ sentiment at the Indian financial market.
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NADTOCHIY, SERGEY, and JAN OBłÓJ. "ROBUST TRADING OF IMPLIED SKEW." International Journal of Theoretical and Applied Finance 20, no. 02 (March 2017): 1750008. http://dx.doi.org/10.1142/s021902491750008x.
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In this paper, we present a method for constructing a (static) portfolio of co-maturing European options whose price sign is determined by the skewness level of the associated implied volatility. This property holds regardless of the validity of a specific model — i.e. the method is robust. The strategy is given explicitly and depends only on one’s beliefs about the future values of implied skewness, which is an observable market indicator. As such, our method allows the use of existing statistical tools to formulate the beliefs, providing a practical interpretation of the more abstract mathematical setting, in which the beliefs are understood as a family of probability measures. One of the applications of the results established herein is a method for trading one’s views on the future changes in implied skew, largely independently of other market factors. Another application of our results provides a concrete improvement of the model-independent super-replication and sub-replication strategies for barrier options proposed in [H. Brown, D. Hobson & L. C. G. Rogers (2001) Robust hedging of barrier options, Mathematical Finance 11 (3), 285–314.], which exploits the given beliefs on the implied skew. Our theoretical results are tested empirically, using the historical prices of S&P 500 options.