Tianyu Mo, Zhenlong Zheng and William T. Lin
Due to disequilibrium between supply and demand in the option market, the option market‐maker is under exposure to certain risks because of their net option positions. This paper…
Abstract
Purpose
Due to disequilibrium between supply and demand in the option market, the option market‐maker is under exposure to certain risks because of their net option positions. This paper aims to pay attention to whether the risk award affects the option price and the shape of implied volatility in the market‐maker system.
Design/methodology/approach
The paper first eliminates the part of implied volatility explained by underlying asset's stochastic volatility‐jump price process, and second sorts out market investors' net demand data from TAIEX Options tick by tick deal data and then finally considers three market maker's risks – unhedgeable risk, capital constrain risk and asymmetric information risk, and how they affect implied volatility's level and slope.
Findings
Through the research in the TAIEX Option market, the paper finds that, under unhedgeable risk, net demand pressure has a significant impact on implied volatility. Especially, unhedgeable risk due to underlying asset's stochastic volatility has the best explanation for implied volatility level, and unhedgeable risk due to underlying asset's jump can explain implied volatility slope to some extent. Capital constrain risk and asymmetric information risk have an insignificant impact on implied volatility.
Research limitations/implications
The findings in this study suggest that the risk award affects the option price and the shape of implied volatility in the market‐maker system and different risks have different effects on the level and slope of option implied volatility.
Practical implications
This paper finds the influence factors of the option price in the market‐maker system. It's useful for China's financial government and investors to learn the price tendency and regular pattern in the future China option market.
Originality/value
This is the first time that a net demand pressure based option pricing model is used, which is derived by Garleanu, Pedersen and Poteshman, to study the TAIEX Options' implied volatility. And the paper improves the methods eliminating the part of implied volatility explained by underlying asset's stochastic volatility‐jump price process.
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Robert F. Bruner, Michael J. Innes and William J. Passer
Set in September 1992, this exercise provides teams of students the opportunity to negotiate terms of a merger between AT&T and McCaw Cellular. AT&T, one of the largest U.S…
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Set in September 1992, this exercise provides teams of students the opportunity to negotiate terms of a merger between AT&T and McCaw Cellular. AT&T, one of the largest U.S. corporations, was the dominant competitor in long-distance telephone communications in the United States. McCaw was the largest competitor in the rapidly growing cellular-telephone communications industry. Prior to the negotiations, AT&T had no position in cellular communications. This case and its companion (F-1143) are designed to allow students to be assigned roles to play. The case may pursue some or all of the following teaching objectives: exercising valuation skills, practicing strategic analysis, exercising bargaining skills, and illustrating practical aspects of mergers and acquisitions.
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![University of Virginia Darden School Foundation](/insight/static/img/university-of-virginia-darden-school-foundation-logo.png)
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Daniel T. L. Shek, Po Chung, Li Lin, Hildie Leung and Eddie Ng
Many of the original buildings have gradually declined because of the development of society and the adjustment of industrial structure. Protecting the classical architecture and…
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Many of the original buildings have gradually declined because of the development of society and the adjustment of industrial structure. Protecting the classical architecture and restoring the original luster of a building to maintain its own youth has become a hot issue in the current architectural planning. In this paper, the performance of the core idea of building conservation in the specific design and planning was discussed through the in-depth understanding of William Sumner Appleton's architectural concept in building protection planning area. Moreover, the profound influence of the idea of building conservation in building conservation was summarized. The current pace of urbanization development process is rapid, thus, many of the original buildings are severely damaged because of many factors. The concept and thought of William Sumner Appleton were re-interpreted based on the design and planning method of World Expo industrial clusters in Shanghai. This study is of great significance for the promotion of historical building protection and concrete practice in our country.
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Recounts Rockefeller philanthropy and the role it has played in shaping the development of medicine in the USA and elsewhere. Questions why social scientific research was not…
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Recounts Rockefeller philanthropy and the role it has played in shaping the development of medicine in the USA and elsewhere. Questions why social scientific research was not included in Rockefeller philanthropy in its formative stages. Investigates the role one Frederick T. Gates played in Rockefeller philanthropy and, particularly, his opposition to the creation of an institute of economic research. Sketches a biography of Gates, covering his professional career and the development of the philosophical views he held. Explores his approach to wholesale giving and scientific philanthropy as he gained more and more influence over Rockefeller’s business interests. Mentions William Lyon Mackenzie King (who later became Prime Minister of Canada) and his role within the Rockefeller philanthropic set‐up – to investigate labour relations – as a key factor in later obtaining support from the Rockefeller Foundation for social scientific research.
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Aim of the present monograph is the economic analysis of the role of MNEs regarding globalisation and digital economy and in parallel there is a reference and examination of some…
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Aim of the present monograph is the economic analysis of the role of MNEs regarding globalisation and digital economy and in parallel there is a reference and examination of some legal aspects concerning MNEs, cyberspace and e‐commerce as the means of expression of the digital economy. The whole effort of the author is focused on the examination of various aspects of MNEs and their impact upon globalisation and vice versa and how and if we are moving towards a global digital economy.
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Develops an original 12‐step management of technology protocol and applies it to 51 applications which range from Du Pont’s failure in Nylon to the Single Online Trade Exchange…
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Develops an original 12‐step management of technology protocol and applies it to 51 applications which range from Du Pont’s failure in Nylon to the Single Online Trade Exchange for Auto Parts procurement by GM, Ford, Daimler‐Chrysler and Renault‐Nissan. Provides many case studies with regards to the adoption of technology and describes seven chief technology officer characteristics. Discusses common errors when companies invest in technology and considers the probabilities of success. Provides 175 questions and answers to reinforce the concepts introduced. States that this substantial journal is aimed primarily at the present and potential chief technology officer to assist their survival and success in national and international markets.
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Reviews literature on industrial choice, ethnography and flexible specialization. Investigates flexible specialization in more depth, claiming that before ethnographic description…
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Reviews literature on industrial choice, ethnography and flexible specialization. Investigates flexible specialization in more depth, claiming that before ethnographic description can be achieved, abstract simplifications and the choices facing businesses in the local community have to be overcome. Proposes two models for economic recovery – flexible specialization and multinational Keynesianism – and discusses the boundaries that both models impose. Explores the public sphere and enterprise culture, particularly in the UK. Warns of the dangers of ethnographic studies of communities, specifically the imposition of meaning onto communal exchanges. Talks also of social solidarity. Observes that the identification of a communal language and a common work culture is tricky but that ethnography has a role to play in establishing the meaning of flexible specialization in small business communities.