Detecting abnormal trading activities in option markets

Marc Chesney, Remo Crameri and Loriano Mancini

Journal of Empirical Finance, 2015, vol. 33, issue C, 263-275

Abstract: We develop an econometric method to detect “abnormal trades” in option markets, i.e., trades which are not driven by liquidity motives. Abnormal trades are characterized by unusually large increments in open interest, trading volume, and option returns, and are not used for option hedging purposes. We use a multiple hypothesis testing technique to control for false discoveries in abnormal trades. We apply the method to 9.6 million of daily option prices.

Keywords: Option trades; Open interest; False discovery rate; Massive dataset (search for similar items in EconPapers)
JEL-codes: G12 G13 G17 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:33:y:2015:i:c:p:263-275

DOI: 10.1016/j.jempfin.2015.03.008

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