The Favorite/Long-shot Bias in S&P 500 and FTSE 100 Index Futures Options: The Return to Bets and the Cost of Insurance

2003 ◽  
Author(s):  
Stewart D. Hodges ◽  
Robert George Tompkins ◽  
William T. Ziemba
Keyword(s):  
Index Futures ◽  
Futures Options ◽  
The Cost

The Favorite-Longshot Bias in S&P 500 and FTSE 100 Index Futures Options: The Return to Bets and the Cost of Insurance

2012 ◽  
pp. 503-522
Author(s):  
Robert G. Tompkins ◽  
William T. Ziemba ◽  
Stewart D. Hodges
Keyword(s):  
Index Futures ◽  
Futures Options ◽  
The Cost

The Favorite-Longshot Bias in S&P 500 and FTSE 100 Index Futures Options: The Return to Bets and the Cost of Insurance

2008 ◽  
pp. 161-180 ◽  
Author(s):  
Robert G. Tompkins ◽  
William T. Ziemba ◽  
Stewart D. Hodges
Keyword(s):  
Index Futures ◽  
Futures Options ◽  
The Cost

scholarly journals Intraday information from S&P 500 Index futures options

2019 ◽  
Vol 42 ◽  
pp. 29-55
Author(s):  
Kian Guan Lim ◽  
Ying Chen ◽  
Nelson K.L. Yap
Keyword(s):  
Index Futures ◽  
Futures Options

scholarly journals The Effect of Uncertainty on Investment: Evidence from Texas Oil Drilling

2014 ◽  
Vol 104 (6) ◽  
pp. 1698-1734 ◽  
Author(s):  
Ryan Kellogg
Keyword(s):  
Dynamic Model ◽  
Implied Volatility ◽  
Price Volatility ◽  
Future Price ◽  
Investment Behavior ◽  
Oil Drilling ◽  
Optimal Response ◽  
Futures Options ◽  
Using Data ◽  
The Cost

This paper estimates the response of investment to changes in uncertainty using data on oil drilling in Texas and the expected volatility of the future price of oil. Using a dynamic model of firms' investment problem, I find that: (i) the response of drilling activity to changes in price volatility has a magnitude consistent with the optimal response prescribed by theory, (ii) the cost of failing to respond to volatility shocks is economically significant, and (iii) implied volatility data derived from futures options prices yields a better fit to firms' investment behavior than backward-looking volatility measures such as GARCH. (JEL C58, D92, G13, G31, L71, Q31)

The emotional cost-of-carry: Chinese investor sentiment and equity index futures basis

2022 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Song Cao ◽  
Ziran Li ◽  
Kees G. Koedijk ◽  
Xiang Gao
Keyword(s):  
Investor Sentiment ◽  
Stock Index ◽  
Stock Index Futures ◽  
Chinese Stock Market ◽  
Content Type ◽  
Index Futures ◽  
Market Participants ◽  
Cost Of Carry ◽  
The Cost ◽  
Equity Index

PurposeWhile the classic futures pricing tool works well for capital markets that are less affected by sentiment, it needs further modification in China's case as retail investors constitute a large portion of the Chinese stock market participants. Their expectations of the rate of return are prone to emotional swings. This paper, therefore, explores the role of investor sentiment in explaining futures basis changes via the channel of implied discount rates.Design/methodology/approachUsing Chinese equity market data from 2010 to 2019, the authors augment the cost-of-carry model for pricing stock index futures by incorporating the investor sentiment factor. This design allows us to estimate the basis in a better way that reflects the relationship between the underlying index price and its futures price.FindingsThe authors find strong evidence that the measure of Chinese investor sentiment drives the abnormal fluctuations in the basis of China's stock index futures. Moreover, this driving force turns out to be much less prominent for large-cap stocks, liquid contracting frequencies, regulatory loosening periods and mature markets, further verifying the sentiment argument for basis mispricing.Originality/valueThis study contributes to the literature by relying on investor sentiment measures to explain the persistent discount anomaly of index futures basis in China. This finding is of great importance for Chinese investors with the intention to implement arbitrage, hedging and speculation strategies.

Asymmetric Volatility and Trading Activity in Index Futures Options

2005 ◽  
Vol 40 (3) ◽  
pp. 381-407 ◽  
Author(s):  
Kam C. Chan ◽  
Louis T. W. Cheng ◽  
Peter P. Lung
Keyword(s):  
Trading Activity ◽  
Index Futures ◽  
Asymmetric Volatility ◽  
Futures Options
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