Following the recent financial crisis, increasing the transparency of credit default swap (CDS) markets has been a popular goal among regulators. We examine how changes in the transparency of the CDS market can impact liquidity in the corresponding equity market. We first extend a model of...

This article investigates option models in the encompassing class of stochastic volatility, return-jumps, and volatility-jumps. Relying on individual equity options on the 50 most active firms and maximum likelihood estimation method, we obtain several findings. First, while stochastic...

This paper shows that the risk-bearing capacity of U.S. securities brokers and dealers is a strong determinant of risk premia in commodity markets. Commodity derivatives are the principal instrument used by producers and consumers of commodities to hedge against commodity price risk....

This paper examines the effects of public news releases on the market liquidity in one of the most important OTC derivatives markets — the CDS market. We document that, at the time of news releases, the bid-ask spread is wider, the number of quotes is larger, and the number of dealers is...

We provide first-time evidence of the real-time characteristics and drivers of jumps in option prices. To this end, we employ high-frequency data from the 24-hour E-mini S&P 500 options market. We find that option prices do not jump simultaneously across strikes and maturities and are...

This paper uses a difference-in-difference methodology to tackle the identification issue in estimating price limits' impacts on market efficiency. Examining the Special Treatment policy in China, I show that 5-basis-point tightening in daily price limits (from ± 10% to ± 5%) significantly...

We model the S&P500 index options dynamics using the CGMY distribution, with independent "up" and "down" return jumps, and diffusive jump intensities. Allowing the up and down parts to be separately parameterised accounts for the dynamic smirk effect, without correlation between returns and...

Firm Profitability - Does it really matter for shareholder return or ROE (return on equity)? Does this question sound oxymoron and antithetic? Not really. On the contrary, evidence has surfaced that Returns on equity - based on the shareholders' equity accounted in the balance sheet - is not...

This paper presents steps to lower the overall volatility in the stock market; as a large portion is unrewarded and unjustified and driven by overreaction accompanies with herd behavior. We first map the key factors that cause volatility, such as: earnings surprise, CEO turnovers, merge and...

Expected idiosyncratic volatility and its positive relation to expected returns of Fu (2009) can be closely replicated, but only when we include information up to time t to estimate the idiosyncratic volatility at time t. Since this involves look-ahead bias, we re-estimate expected idiosyncratic...