Vega-informed trading and options market reform

Doojin Ryu, Doowon Ryu and Heejin Yang

Applied Economics Letters, 2020, vol. 27, issue 1, 19-24

Abstract: This study examines the effect of reform to the KOSPI200 options market on volatility trading. We find that the information quality of net volatility demand significantly changes after the reform. The overall options demand for volatility does not predict spot market volatility before the market reform, but it does so after the reform. The significant information content of volatility trading can be attributed to the vega-weighted net demand of institutional investors.

Date: 2020
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DOI: 10.1080/13504851.2019.1606399

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