We study how firm ambiguity---Knightian uncertainty---affects investor trading behavior using the options market as a laboratory. Greater ambiguity in the underlying asset negatively relates to both options open interest and options trading volume. The reduction in options trading activity is...

This paper provides a first economic analysis of liquid staking tokens, which are derivatives representing a share of staked tokens in proof-of-stake blockchains. There is substantial time-variation in the "liquid staking basis"', i.e., the price difference between a derivative staking token and...

Kang et al. (2020) find cross-sectional evidence that short- and long-term variation of position changes are driven by liquidity demand of noncommercials and hedging demands of commercials in commodity futures markets. In this paper, we find the commercials' hedging demands drive both short-term...

We have entered an era where the importance of decentralized solutions has become more obvious. Blockchain technology and its derivatives are distributed ledger technologies that keep the registry of data between peers of a network. This ledger is secured within a successive over looping...

Changes in stock prices, both when the stock price increases or decreases in price, can be used to gain profits. One of the investment instruments that can be used to profit from changes in stock prices is stock options. In addition, stock options can also be used to minimize the amount of loss...

Volatility Skew and Smile of Interest Rate products (Swaption and Caplet) are represented by SABR (Stochastic Alpha Beta Rho model). So, the Interest Rate derivatives model for pricing the callable exotic swaps should be comparable to the SABR volatility surface. In the interest rate derivatives...

We study the effect of derivatives use for both trading and hedging on firm value and financial and market performance using a hand-collected data sample from UK financial firms. We show that the use of derivatives for foreign exchange and interest rate risk hedging enhances value, and that...

Derivative securities or derivatives are financial contracts that derive their value from the price of an underlying asset, such as a stock or commodity, or even from an underlying financial index such as interest rates. Derivatives can reduce risk by providing insurance, which in financial...

Is Bitcoin the payment system of the future? This chapter argues that Bitcoin is neither a currency nor gold, but that it is a tradable asset and an alternative form of investment. Bitcoin also exhibits some features as an investment asset that are similar to collectibles. The true value of...

Financial markets are in constant flux. New players and services, often leveraging new technology, emerge and challenge the status quo. Changes in markets, regulation, the environment, and global politics affect the business and risk profiles of financial market participants. The central...