Nimalendran, Mahendrarajah; Rzayev, Khaladdin; Sagade, … - 2021
Based on granular NASDAQ HFT data, we find that HFT activity in the stock market increases market-making costs in the options markets via two channels: the hedging channel and the arbitrage channel. HFTs' liquidity-demanding orders increase the hedging costs due to a higher stock bid-ask spread...