We investigate the contribution of option markets to price discovery, using a modification of Hasbrouck’s (1995) “information share ” approach. Based on five years of stock and options data for 60 firms, we estimate the option market’s contribution to price discovery to be about 17 percent

This paper develops and tests a heterogeneous agents model for the option market. Our agents have differing beliefs about the level of volatility of the underlying stock index and trade accordingly. We consider two types of agents: fundamentalists, who are assumed to expect the conditional

trading much less is known about the trading of this important class of securities. This article uses a unique option data set to investigate activity in the equity option market. There are three main goals. The first is to describe some major stylized facts

Post-crash distributions inferred from S

(Option Metrics) for providing the options data. We are especially grateful to comments from Owen Lamont, Jeff Wurgler, the anonymous referee and seminar participants at

Asset pricing puzzles:

Abstract not found

We would like to thank David Afriat for excellent assistance and the participants of the research group of the FX External Activity Dept., the Bank of Israel. We also like to thank Rafi Eldor for his comments as a discussant at the 2006 meeting of the Israel Economic Association- 1-

-factor string model of the term structure. One of the most important problems in option pricing theory is the valuation and optimal exercise of derivatives with American-style exercise features. These types of derivatives are found in all major financial markets including the equity, commodity, foreign

This paper proposes and estimates a more general parametric stochastic variance model of equity index returns than has been previously considered using data from both underlying and options markets. The parameters of the model under both the objective and riskneutral measures are estimated