Detecting informed activities in European-style option tradings

Lyudmila A. Glik; Oleg L. Kritski

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arXiv · 1403.3294

Detecting informed activities in European-style option tradings

Lyudmila A. Glik·Oleg L. Kritski

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Abstract

We propose a mathematical procedure for finding informed trader activities in European-style options and their underlying asset. The regression model (9) with moving average component was written. Being added to it ARMA-process for log-price differences of underlying asset, the generalized model is written as Vector ARMA, stable at abs(ro)<1. We also constructed an informed trader activity presence criterion. Using TAIFEX option prices we investigate whether such activity was at the market. We found that there is no significant influence for pricing process made by major market players.

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Lyudmila A. Glik, Oleg L. Kritski. 2014-03-13. Detecting informed activities in European-style option tradings. https://arxiv.org/abs/1403.3294

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