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Market impact: a systematic study of the high frequency options market

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  • Emilio Said
  • Ahmed Bel Hadj Ayed
  • Damien Thillou
  • Jean-Jacques Rabeyrin
  • Frédéric Abergel

Abstract

This paper deals with a fundamental subject that has seldom been addressed in recent years, that of market impact in the options market. Our analysis is based on a proprietary database of metaorders—large orders that are split into smaller pieces before being sent to the market—on one of the main Asian markets. In line with our previous work on the equity market [Said, E., Bel Hadj Ayed, A., Husson, A. and Abergel, F., Market impact: A systematic study of limit orders. Mark. Microstruct. Liq., 2018, 3(3&4), 1850008.], we propose an algorithmic approach to identify metaorders, based on some implied volatility parameters, the at the money forward volatility and at the money forward skew. In both cases, we obtain results similar to the now well-understood equity market: Square-Root Law, Fair Pricing Condition and Market Impact Dynamics.

Suggested Citation

  • Emilio Said & Ahmed Bel Hadj Ayed & Damien Thillou & Jean-Jacques Rabeyrin & Frédéric Abergel, 2021. "Market impact: a systematic study of the high frequency options market," Quantitative Finance, Taylor & Francis Journals, vol. 21(1), pages 69-84, January.
    • Handle: RePEc:taf:quantf:v:21:y:2021:i:1:p:69-84
    DOI: 10.1080/14697688.2020.1791948
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    Cited by:

    1. Emilio Said, 2022. "Market Impact: Empirical Evidence, Theory and Practice," Working Papers hal-03668669, HAL.
    2. Emilio Said, 2022. "Market Impact: Empirical Evidence, Theory and Practice," Papers 2205.07385, arXiv.org.

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