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Volatility discovery and volatility quoting on markets for options and warrants

Author

Listed:
  • Rainer Baule
  • Bart Frijns
  • Milena E. Tieves

Abstract

In several countries, classical options markets coexist with markets for bank‐issued options (warrants) that are sold to retail investors. An interesting question in such cases is whether these bank‐issued options merely reflect the options market information about future volatility or whether they themselves contribute to volatility discovery. We find that the options market is the informational leader in terms of volatility discovery, but the aggregate warrants market also makes significant contributions to volatility discovery. Looking at the intra‐day volatility quoting behavior, warrant issuers tend to increase their quotes relative to the options markets.

Suggested Citation

  • Rainer Baule & Bart Frijns & Milena E. Tieves, 2018. "Volatility discovery and volatility quoting on markets for options and warrants," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 38(7), pages 758-774, July.
    • Handle: RePEc:wly:jfutmk:v:38:y:2018:i:7:p:758-774
    DOI: 10.1002/fut.21900
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    Cited by:

    1. Rainer Baule & Bart Frijns & Sebastian Schlie, 2024. "Feedback Trading: The Intraday Case of Retail Derivatives," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 44(9), pages 1487-1507, September.
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    3. Xuejun Jin & Jingyu Zhao & Xingguo Luo, 2022. "Why are the prices of European‐style derivatives greater than the prices of American‐style derivatives?," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 42(9), pages 1772-1793, September.

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