Publication:
High-frequency trading in the stock market and the costs of options market making

Thumbnail Image

Files

Primary IR04614.pdf (916.37 KB)

Departments

OrgUnit Logo
Organizational Unit

School / College / Institute

OrgUnit Logo
Organizational Unit

Program

KU-Authors

KU Authors

Co-Authors

Nimalendran, Mahendrarajah
Sagade, Satchit

Editor & Affiliation

Compiler & Affiliation

Translator

Other Contributor

Date

2024

Language

Type

Journal Article

Embargo Status

Journal Title

Journal ISSN

Volume Title

Alternative Title

Abstract

We investigate how high-frequency trading (HFT) in equity markets affects options market liquidity. We find that increased aggressive HFT activity in the stock market leads to wider bid-ask spreads in the options market through two main channels. First, options market makers' quotes are exposed to sniping risk from HFTs exploiting put-call parity violations. Second, informed trading in the options market further amplifies the impact of HFT in equity markets on the liquidity of options by simultaneously increasing the options bid-ask spread and intensifying aggressive HFT activity in the underlying market.

Source

Publisher

Elsevier Sci Ltd

Subject

Business, Finance, Economics

Citation

Has Part

Source

Journal of Financial Economics

Book Series Title

Edition

DOI

10.1016/j.jfineco.2024.103900

URI

https://doi.org/10.1016/j.jfineco.2024.103900
 https://hdl.handle.net/20.500.14288/22685

item.page.datauri

Link

Rights

Copyrights Note

Collections

Publications with Fulltext

Endorsement

Review

Supplemented By

Referenced By

Related Goal

Thumbnail Image
GoalMetadata only
01 - No Poverty
Eradicating poverty is not a task of charity, it’s an act of justice and the key to unlocking an enormous human potential. Still, nearly half of the world’s population lives in poverty, and lack of food and clean water is killing thousands every single day of the year. Together, we can feed the hungry, wipe out disease and give everyone in the world a chance to prosper and live a productive and rich life.
Thumbnail Image
GoalOpen Access
08 - Descent Work and Economic Growth
Economic growth should be a positive force for the whole planet.This is why we must make sure that financial progress creates decent and fulfilling jobs while not harming the environment. We must protect labour rights and once and for all put a stop to modern slavery and child labour. If we promote job creation with expanded access to banking and financial services, we can make sure that everybody gets the benefits of entrepreneurship and innovation.
Thumbnail Image
GoalOpen Access
11 - Sustainable Cities and Communities
The world’s population is constantly increasing.To accommodate everyone, we need to build modern, sustainable cities. For all of us to survive and prosper, we need new, intelligent urban planning that creates safe, affordable and resilient cities with green and culturally inspiring living conditions.
Thumbnail Image
GoalOpen Access
13 - Climate Action
Climate change is a real and undeniable threat to our entire civilization.The effects are already visible and will be catastrophic unless we act now. Through education, innovation and adherence to our climate commitments, we can make the necessary changes to protect the planet. These changes also provide huge opportunities to modernize our infrastructure which will create new jobs and promote greater prosperity across the globe.

5

Views

10

Downloads

View PlumX Details