An empirical study of the cross market efficiency of the index options market: A case study from the Italian derivatives market

© 2020, Emerald Publishing Limited. Purpose: This study aims to examine the cross-market efficiency of the FTSE/MIB index options contracts traded on the Italian derivatives market (IDEM) during a period including the financial crisis between 1st October 2007 and 31st December 2012 using daily option prices. Design/methodology/approach: Two fundamental no-arbitrage conditions were tested: the lower boundary condition (LBC) and the put–call parity (PCP) condition while taking into account the role of transaction costs in mitigating the number of violations reported. Ex post tests of LBC and PCP revealed a low incidence of mispricing in this market. Furthermore, to check the robustness of the results obtained by the ex post tests, ex ante tests were applied to PCP violations occurring within a one-day lag. Findings: The results showed a significant drop in the number of profitable arbitrage strategies. The findings obtained from all these tests generally support the cross-market efficiency of the Italian index options market during the sample period, though some violations were occasionally reported. Overall, the number and monetary value of the violations reported declined during the post-financial crisis period compared to those during the financial crisis period. Research limitations/implications: This study can be extended to test the relationships between arbitrage profitability and other factors such as the moneyness (in the money, out of the money, at the money) of options and the maturity of options. Options market efficiency tests can be conducted such as call and put spreads, box spreads and put/call convexities (butterfly spreads). Originality/value: There are several factors that influenced the decision to test the Italian index options market. First, the limited number of studies conducted on this market. Second, the fact that the two main studies on this market are relatively old, which makes it interesting to test the efficiency of this market with respect to a new set of data, taking into account the introduction of the Euro and the impact of the recent financial crisis on this market and whether the market efficiency hypothesis holds during the period of crisis. Third, it is important to consider the effect of the new rules applied to this market

Reviewing the hedge funds literature I:hedge funds and hedge funds' managerial characteristics

This paper summarizes the literature on hedge funds (HFs) developed over the last two decades, particularly that which relates to managerial characteristics (a companion piece covers the return and risk management characteristics of HFs). It classifies, the current HF literature, suggesting which critical problems have been “solved” and which problems have not been yet adequately addressed. It also discusses the effects of past financial regulation and the prospects for the effect of new financial regulation on the HF industry and its performance and risk management practices, and suggests new avenues for research. Furthermore, it highlights the importance of managerial characteristics for HF performance, and the successes and the shortfalls to date in developing more sophisticated HF-related risk management tools

Reviewing the hedge funds literature II:hedge funds' returns and risk management characteristics

This paper summarizes the literature on hedge funds (HFs) developed over the last two decades, particularly that which relates to risk management characteristics (a companion piece investigates the managerial characteristics of HFs). It discusses the successes and the shortfalls to date in developing more sophisticated risk management frameworks and tools to measure and monitor HF risks, and the empirical evidence on the role of the HFs and their investment behaviour and risk management practices on the stability of the financial system. It also classifies the HF literature considering the most recent contributions and, particularly, the regulatory developments after the 2007 financial crisis

Engaged ETFs and Firm Performance

ETFs have often tracked indices and charged low fees so their incentives to improve firm performance are questionable although little empirical work has investigated this issue. Theoretically, however, we expect firms to perform better when held by more engaged ETFs. We develop a new measure of engagement using a weighted-average concentration measure which captures the combined effect of the concentration of the portfolios of the ETFs investing in a firm and the ownership of the firm by those ETFs. Using ETFs’ investment in US-listed firms for the period 2000-2019, we confirm our expectations that more engaged ETFs improve firm performance

An empirical study of the cross market efficiency of the Index Options Market: a case study from the Italian Derivatives Market

This study examines the cross-market efficiency of the FTSE/MIB index options contracts traded on the Italian derivatives market (IDEM) between 1st October 2007 and 31st December 2012, a period including the financial crisis, using daily option prices. Two fundamental no-arbitrage conditions are tested: the lower boundary condition (LBC) and the put/call parity (PCP) condition while taking into account the role of transaction costs in mitigating the number of violations reported. Ex-post tests of LBC and PCP revealed a low incidence of mispricing in this market. Furthermore, to check the robustness of the results obtained by the ex-post tests, ex-ante tests were applied to PCP violations occurring within a one-day lag. The results showed a significant drop in the number of profitable arbitrage strategies. Overall, the number and monetary value of the violations reported declined during the post financial crisis period compared to those during the financial crisis period. The findings obtained from these tests generally support the cross-market efficiency of the Italian index options market during the sample period, though some violations were occasionally reported

An empirical study of the cross market efficiency of the Index Options Market: a case study from the Italian Derivatives Market

This study examines the cross-market efficiency of the FTSE/MIB index options contracts traded on the Italian derivatives market (IDEM) between 1st October 2007 and 31st December 2012, a period including the financial crisis, using daily option prices. Two fundamental no-arbitrage conditions are tested: the lower boundary condition (LBC) and the put/call parity (PCP) condition while taking into account the role of transaction costs in mitigating the number of violations reported. Ex-post tests of LBC and PCP revealed a low incidence of mispricing in this market. Furthermore, to check the robustness of the results obtained by the ex-post tests, ex-ante tests were applied to PCP violations occurring within a one-day lag. The results showed a significant drop in the number of profitable arbitrage strategies. Overall, the number and monetary value of the violations reported declined during the post financial crisis period compared to those during the financial crisis period. The findings obtained from these tests generally support the cross-market efficiency of the Italian index options market during the sample period, though some violations were occasionally reported

Polymorphism of VDR gene - the most effective molecular marker of osteoporotic bone fractures risk within postmenopausal women from Wielkopolska region of Poland

Osteoporoza jest ważnym problemem zdrowotnym dzisiejszych czasów. W większości przypadków dotyczy kobiet w okresie pomenopauzalnym. Rozwija się zwykle powoli i początkowo ma bezobjawowy przebieg. Często pierwszym jej objawem i groźnym powikłaniem jest złamanie kości. Skutki tego zdarzenia mogą wpływać negatywnie na jakość życia oraz mogą być przyczyną zwiększonej umieralności tej populacji. Efektywna prewencja i leczenie osteoporozy polega na identyfikacji i ocenie indywidualnego ryzyka złamania kości. Do tego celu można wykorzystać wiele metod diagnostycznych, w tym również metody genetyczne. Celem badania była ocena, które z różnych wariantów genotypu związane są z występowaniem choroby oraz mają wpływ na gęstość mineralną kości. Obserwacji poddano 261 pacjentek z osteoporozą pomenopauzalną. W badaniu ocenie poddano polimorfizmy następujących genów: OPG, VDR, ESR1, TGFB1, COL1A1 oraz BMP2.Znamienność statystyczną pomiędzy wartościami gęstości mineralnej kości a polimorfizmem genu wykazano tylko dla allelu T TaqI genu VDR. W populacji kobiet z osteoporozą pomenopauzalną, zamieszkujących teren Wielkopolski, stwierdzono częstsze występowanie genotypu aa dla ApaI, bb dla Bsm i TT dla Taq genu VDR u pacjentek z większym ryzykiem złamania kości.The major public health problem which will arise is a frequency of osteoporosis. The first manifestations of this disease are often bone fractures. Identification and evaluation of individual bone fracture risk will be the most effective way of solving the problem. Genetic determination of osteoporosis is unquestionable. The aim of this study is to detect which variants of genotypes lead to illness. We investigated 187 patients with osteoporosis (161 women, 26 men) and 19 healthy subjects. Polymorphisms of the following genes were investigated: OPG, VDR, ESR1, TGFB1 COL1A1, and BMP2. The statistically significant relationship between BMD value and T allele of Taq I VDR gene were found. Genotypes: aa, bb, TT of VDR gene occur more frequently in polish osteoporotic population in Wielkopolska region within patients with higher risk of bone fractures

The effect of size on the failure probabilities of SMEs: An empirical study on the US market using discrete hazard model

This paper investigates the extent to which the size affects the SME probabilities of bankruptcy. Using a dataset of (11,117) US non-financial firms, of which (465) filed for insolvency under chapters 7/11 between 1980 and 2013. We forecast the bankruptcy probabilities by developing four discrete-time duration-dependent hazard models for SMEs, Micro, Small, and Medium firms. A comparison of the default prediction models for medium firms and SMEs suggests that an almost identical set of explanatory variables affect the default probabilities leading us to believe that treating each of these groups separately has no material impact on the decision making process. However, comparisons between the micro and small firms with the SMEs firms strongly suggest that these categories need to be considered separately when modelling their credit risk

Nonstandard Errors

In statistics, samples are drawn from a population in a data-generating process (DGP). Standard errors measure the uncertainty in estimates of population parameters. In science, evidence is generated to test hypotheses in an evidence-generating process (EGP). We claim that EGP variation across researchers adds uncertainty-nonstandard errors (NSEs). We study NSEs by letting 164 teams test the same hypotheses on the same data. NSEs turn out to be sizable, but smaller for more reproducible or higher rated research. Adding peer-review stages reduces NSEs. We further find that this type of uncertainty is underestimated by participants

Non-Standard Errors

In statistics, samples are drawn from a population in a data-generating process (DGP). Standard errors measure the uncertainty in estimates of population parameters. In science, evidence is generated to test hypotheses in an evidence-generating process (EGP). We claim that EGP variation across researchers adds uncertainty: Non-standard errors (NSEs). We study NSEs by letting 164 teams test the same hypotheses on the same data. NSEs turn out to be sizable, but smaller for better reproducible or higher rated research. Adding peer-review stages reduces NSEs. We further find that this type of uncertainty is underestimated by participants