Does options trading lead to greater cash market volatility?
✍ Scribed by Arjun Chatrath; Sanjay Ramchander; Frank Song
- Publisher
- John Wiley and Sons
- Year
- 1995
- Tongue
- English
- Weight
- 826 KB
- Volume
- 15
- Category
- Article
- ISSN
- 0270-7314
No coin nor oath required. For personal study only.
✦ Synopsis
There is a growing tendency for institutional investors to employ index options in their portfolios. There preferences for index options over index futures markets may he traced to the differences in the rights and obligations tied to the two securities. First, the option buyer can limit the investment risk to the premium of the option. Second, option buyers are not subject to margin calls and thus have staying power, the ability to maintain a market position during adverse market swings. ''The impulse responses, with upper and lower 2-standard error bounds, are obtained via a Monte Carlo simulation program.