EconPapers    
Economics at your fingertips  
 

Systematic Noise: Micro-movements in Equity Options Markets

Adam Wu

Papers from arXiv.org

Abstract: Equity options are known to be notoriously difficult to price accurately, and even with the development of established mathematical models there are many assumptions that must be made about the underlying processes driving market movements. As such, the theoretical prices outputted by these models are often slightly different from the realized or actual market price. The choice of model traders use can create many different valuations on the same asset, which may lead to a form of systematic micro-movement or noise. The analysis in this paper demonstrates that approximately 1.7%-4.5% of market volume for options written on the SPY ETF within the last two years could potentially be due to systematic noise.

New Economics Papers: this item is included in nep-fmk
Date: 2017-08
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://arxiv.org/pdf/1708.06855 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1708.06855

Access Statistics for this paper

More papers in Papers from arXiv.org
Series data maintained by arXiv administrators ().

 
Page updated 2017-09-29
Handle: RePEc:arx:papers:1708.06855