Market impact: a systematic study of the high frequency options market

Emilio Said, Ahmed Bel Hadj Ayed, Damien Thillou, Jean-Jacques Rabeyrin and Frédéric Abergel

Quantitative Finance, 2021, vol. 21, issue 1, 69-84

Abstract: This paper deals with a fundamental subject that has seldom been addressed in recent years, that of market impact in the options market. Our analysis is based on a proprietary database of metaorders—large orders that are split into smaller pieces before being sent to the market—on one of the main Asian markets. In line with our previous work on the equity market [Said, E., Bel Hadj Ayed, A., Husson, A. and Abergel, F., Market impact: A systematic study of limit orders. Mark. Microstruct. Liq., 2018, 3(3&4), 1850008.], we propose an algorithmic approach to identify metaorders, based on some implied volatility parameters, the at the money forward volatility and at the money forward skew. In both cases, we obtain results similar to the now well-understood equity market: Square-Root Law, Fair Pricing Condition and Market Impact Dynamics.

Date: 2021
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DOI: 10.1080/14697688.2020.1791948

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