The question of whether and to what extent option trading impacts underlying stock prices has been of interest since options began exchange-based trading in 1973. Recent research presents evidence of an informational channel through which option trading impacts stock prices by showing that...

We use brokerage account records to study trading during the Chinese put warrants bubble and find evidence consistent with extrapolative theories of speculative asset price bubbles. We identify the event that started the bubble and show that investors engaged in a form of feedback trading based...

We use “tick-by-tick” quote data for 39 liquid U.S. stocks and options on them, and focus on events when the two markets disagree about the stock price in the sense that the option-implied stock price obtained from the put-call parity relation is inconsistent with the actual stock price....

This paper presents direct evidence that option price quotes do not contain any information about future stock prices beyond what is already reflected in current stock prices. We use trade and quote data for 39 liquid U.S. stocks and ETFs and options on them, and focus on events when the two...

We find evidence consistent with previously unrecognized market manipulation by broker-dealers. Specifically, we show that pre-trade hedging, which is distinct from front-running, alters prices at which derivative trades occur. We document that this behavior is intentional by exploiting...

Recent research argues that uncertainty about future stock borrowing fees is an impediment to short-selling and it explains the risk-adjusted performance of short strategies. One possible mechanism is that borrowing fee risk carries a risk premium. Since the present value of the uncertain...

We use data on signed option volume to study which components of option volume predict stock returns and resolve the seemingly inconsistent results in the literature. We find no evidence that trades related to synthetic short positions in the underlying stocks contain more information than...

There are a number of circumstances in finance where it is useful to estimate diffusion processes conditional on some event. In this paper, we develop the theoretical and numerical tools necessary to perform conditional estimation of diffusion processes within a generalized method of moments...