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Contribution Details

Type Working Paper
Scope Discipline-based scholarship
Title Detecting informed trading activities in the options markets
Organization Unit
Authors
  • Marc Chesney
  • Remo Crameri
  • Loriano Mancini
Language
  • English
Institution University of Zurich
Series Name NCCR FINRISK Working Paper
Number 560
Date 2014
Abstract Text We develop statistical methods to detect informed trading in options markets. We apply these methods to 31 companies from various sectors over 14 years analyzing approximately 9.6 million option prices. We find that option informed trading tends to cluster prior to certain events, takes place more in put than call options, generates easily large gains exceeding millions,is not contemporaneously reflected in the underlying stock price, involves around the money options during calm times and out-of-the-money options during turbulent times. These findings are not driven by false discoveries in informed trades which are controlled using multiple hypothesis testing techniques.
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