Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/122080
Authors: 
Kapetanios, George
Neumann, Michael
Skiadopoulos, George
Year of Publication: 
2014
Series/Report no.: 
Working Paper, School of Economics and Finance, Queen Mary, University of London 730
Abstract: 
We study the real-time characteristics and drivers of jumps in option prices. To this end, we employ high frequency data from the 24-hour E-mini S&P 500 options market. We find that option prices do not jump simultaneously across strikes and maturities and are uncorrelated with jumps in the underlying futures price. 14% to 28% of detected option price jumps occur around scheduled news releases. However, it is illiquidity rather than the news content that drives jumps. Evidence suggests that option traders increase bid-ask spreads to account for trading against investors who are skilled processors of public releases.
Subjects: 
Asymmetric information
Co-jumps
Limit order markets
Liquidity
Option Markets
News announcements
JEL: 
C58
G10
G12
G13
Document Type: 
Working Paper

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