We model and examine the impact of information releases on market uncertainty as measured by the implied standard deviation (ISD) from option markets. Distinguishing between scheduled and unscheduled announcements, we hypothesize that since the timing, although not the content, of scheduled...

We examine how prices in interest rate and foreign exchange futures markets adjust to the new information contained in scheduled macroeconomic news releases in the very short run. Using 10-second returns and tick-by-tick data, we find that prices adjust in a series of numerous small, but rapid,...

We document the trading activities over the period from June 1993 through March 1997 of the 223 largest traders of heating oil futures - traders who together account for 58% of the open interest in this market. Dividing these traders into eleven different groupings: refiners,...

Dividing the 223 largest traders of heating oil futures between June 1993 and March 1997 into 11 different line-of-business groupings, we document their trading activity. We find substantial and significant differences between the 11 trader types in their propensity to take long, short, or...

We explore how wheat spot and futures market volatility has been impacted by government farm programs during the 1950- 1993 period. We find that changing volatility in both markets is highly associated with changing farm programs. The mandatory allotment programs of the 1950's and early 1960's...

It is well known that for options with the same expiration date, levels of implied volatility differ systematically by strike price in a smile or smirk pattern. We show that (in the equity index options market) information content also differs systematically by strike price displaying a...

The paper compares the forecasting ability of the most popular volatility forecasting models and develops an alternative. The comparison of existing models focuses on four issues: 1) the relative weighting of recent versus older observations, 2) the estimation criteria, 3) the trade-off in terms...

Based on data on options on Eurodollar futures, the trading and design of vertical spreads (aka bull and bear spreads) are examined. Reducing the cost and/or increasing the likelihood of profit on long positions appears more important than risk reduction on short positions in most traders'...

Using data from the Eurodollar options on futures market, this paper examines six volatility trades: straddles, strangles, guts, butterflies, iron butterflies, and condors. We argue that straddles and strangles should have lower transaction costs than the other four strategies, and that (when...

Documenting spread and combination trading in a major options market for the first time, we find that spreads and combinations collectively account for over 55% of large trades (trades of 100 contracts or more) in the Eurodollar options market and almost 75% of the trading volume due to large...