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This paper employs three months of observations sampled at 60‐second intervals to analyze the behavior of two basket indices from the emerging Athens Stock Exchange: the General Index of the Main (Listed) Securities Market and the Index of the Secondary (Unlisted) Securities Market. The empirical analysis employs robust regression using dummy variables to uncover a rich variety of time‐of‐day regularities in the first four moments of the distribution of returns, the tail behavior, and the dynamic and cross‐dynamic behavior of the two markets. Markets tend to behave differently during their opening and closing, while results are invariably sensitive to outliers. Overall, the results are comparable to those reported for developed equity markets. However, in contrast to other studies, we find no conclusive evidence of long‐memory in either the mean or variance process. ARMA models of seasonally differenced absolute returns were used as a simple but effective way of dealing with the strong regularity in volatility.

The purpose of this paper is to study the importance of business time, and market opening/closing times and days, for American option pricing.

A Bermudan pricing approach is employed whereby the option can be exercised only during the times and days the market is open. The authors apply the approach to the S&P 100 options market.

It was found that the potential biases that can arise from ignoring the non‐continuous operation of the market are not negligible.

For expositional purposes, the authors assume that the price of the underlying follows a Geometric Brownian motion. This assumption could be relaxed by future research and more complex price dynamics models could be considered.

The findings in this paper could be used in correcting observed option prices, prior to investigating the rationality of early exercise decisions, or in measuring the size of early exercise premia.

This is the first study to examine the effects of business time, and market opening/closing times and days, to American option prices.

The volatility of a financial asset is an important input for financial decision‐making in the context of asset allocation, option pricing, and risk management. The authors compare and contrast four approaches to stochastic volatility to determine which is most appropriate to each of these various needs.