Overview and details of the sessions of this conference. Please select a date or location to show only sessions at that day or location. Please select a single session for detailed view (with abstracts and downloads if available).
Please note that all times are shown in the time zone of the conference. The current conference time is: 13th May 2024, 08:57:42pm EDT
1SEC, United States of America; 2University of Pennsylvania; 3University of Illinois at Urbana-Champaign
Discussant: Shuaiyu Chen (Purdue University)
Among the many possible complex options trades, just a few dominate the market. Two simple roles largely explain their use. Using a new approach to identify complex trades, we find that vertical, vertical ratio, calendar, and diagonal spreads account for most complex volume, and volatility trades such as straddles and strangles account for a much smaller fraction. Many trades are executed not to obtain the payoffs of the complex packages, but instead to adjust simple options positions by changing either strikes or expiration dates. Others appear intended to make simple bets on price movements with small initial investments.
Detecting Informed Trading Risk from Undercutting Activity in Limit Order Markets
Peter Dixon1, Yashar Barardehi2, Qiyu Liu1
1SEC, United States of America; 2Chapman University
Discussant: Travis Johnson (University of Texas at Austin)
We develop simple measures of informed trading risk (QIDRes) that capture abnormal undercutting activity, reflecting the intuition that liquidity-providing algorithms compete less to fill incoming marketable orders when adverse selection exposure rises. Despite being conveniently computed from TAQ data, when examined around major information events, QIDRes behaves similarly to existing measures of informed trading intensity/probability whose constructions are complex and demanding. Our measure predicts both arrivals and magnitudes of imminent information events. Moreover, episodes of high QIDRes coincide with weaker subsequent price reversals, increased short selling activity, and more likely informed institutional trades. QIDRes positively predicts stock returns up to six months forward, especially among stocks with tighter short sale constraints. However, QIDRes is by construction orthogonal to stock liquidity and does not constitute a persistent stock characteristic, so we attribute its return predictability to limits to arbitrage.
Political Uncertainty and Capital Raising through Private Offerings
Vlad Ivanov1, Matthew Wynter2
1SEC, United States of America; 2Stony Brook University
Discussant: Minmo Gahng (Cornell University)
Private offerings raise about 15 percent less capital during the months preceding local U.S. gubernatorial elections relative to other private offerings issued within the same state and year. Consistent with limited investor pools determining private companies’ access to capital, we observe evidence of smaller capital raisings per investor and no decreases in capital raising for offerings involving venture capitalists, regardless of whether the company eventually has a successful exit or remains privately held. We also observe increased use of investment minimums preceding elections. The findings provide evidence that reduced access to capital leads to smaller private proceeds prior to elections.
