IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-02014248.html
   My bibliography  Save this paper

Market Impact: A Systematic Study of the High Frequency Options Market

Author

Listed:
  • Emilio Said

    (BNP-Paribas, MICS - Mathématiques et Informatique pour la Complexité et les Systèmes - CentraleSupélec - Université Paris-Saclay)

  • Ahmed Bel Hadj Ayed

    (BNP-Paribas)

  • Damien Thillou

    (BNP-Paribas)

  • Jean-Jacques Rabeyrin

    (BNP-Paribas)

  • Frédéric Abergel

    (BNP-Paribas, MICS - Mathématiques et Informatique pour la Complexité et les Systèmes - CentraleSupélec - Université Paris-Saclay)

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 et al., 2018], 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, 2020. "Market Impact: A Systematic Study of the High Frequency Options Market," Post-Print hal-02014248, HAL.
  • Handle: RePEc:hal:journl:hal-02014248
    DOI: 10.1080/14697688.2020.1791948
    Note: View the original document on HAL open archive server: https://hal.science/hal-02014248v2
    as

    Download full text from publisher

    File URL: https://hal.science/hal-02014248v2/document
    Download Restriction: no

    File URL: https://libkey.io/10.1080/14697688.2020.1791948?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Bruno Bouchard & G Loeper & Y Zou, 2017. "Hedging of covered options with linear market impact and gamma constraint," Post-Print hal-01247523, HAL.
    2. C. Gomes & H. Waelbroeck, 2015. "Is market impact a measure of the information value of trades? Market response to liquidity vs. informed metaorders," Quantitative Finance, Taylor & Francis Journals, vol. 15(5), pages 773-793, May.
    3. Bence Toth & Zoltan Eisler & Jean-Philippe Bouchaud, 2016. "The square-root impact law also holds for option markets," Papers 1602.03043, arXiv.org.
    4. Bence Toth & Yves Lemperiere & Cyril Deremble & Joachim de Lataillade & Julien Kockelkoren & Jean-Philippe Bouchaud, 2011. "Anomalous price impact and the critical nature of liquidity in financial markets," Papers 1105.1694, arXiv.org, revised Nov 2011.
    5. Emilio Said & Ahmed Bel Hadj Ayed & Alexandre Husson & Frédéric Abergel, 2018. "Market Impact: A systematic study of limit orders," Working Papers hal-01561128, HAL.
    6. Nataliya Bershova & Dmitry Rakhlin, 2013. "The non-linear market impact of large trades: evidence from buy-side order flow," Quantitative Finance, Taylor & Francis Journals, vol. 13(11), pages 1759-1778, November.
    7. Jonathan Donier & Julius Bonart, 2014. "A Million Metaorder Analysis of Market Impact on the Bitcoin," Papers 1412.4503, arXiv.org, revised Sep 2015.
    8. J. Doyne Farmer & Austin Gerig & Fabrizio Lillo & Henri Waelbroeck, 2013. "How efficiency shapes market impact," Quantitative Finance, Taylor & Francis Journals, vol. 13(11), pages 1743-1758, November.
    9. Bruno Bouchard & G. Loeper & Y. Zou, 2017. "Hedging of covered options with linear market impact and gamma constraint," Post-Print hal-01611790, HAL.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Emilio Said, 2019. "How Option Hedging Shapes Market Impact," Papers 1910.05056, arXiv.org, revised Nov 2019.
    2. Emilio Said & Ahmed Bel Hadj Ayed & Damien Thillou & Jean-Jacques Rabeyrin & Fr'ed'eric Abergel, 2019. "Market Impact: A Systematic Study of the High Frequency Options Market," Papers 1902.05418, arXiv.org, revised May 2022.
    3. Emilio Said & Ahmed Bel Hadj Ayed & Damien Thillou & Jean-Jacques Rabeyrin & Frédéric Abergel, 2019. "Market Impact: A Systematic Study of the High Frequency Options Market," Working Papers hal-02014248, HAL.
    4. Emilio Said, 2022. "Market Impact: Empirical Evidence, Theory and Practice," Working Papers hal-03668669, HAL.
    5. Fabrizio Lillo, 2021. "Order flow and price formation," Papers 2105.00521, arXiv.org.
    6. Emilio Said, 2022. "Market Impact: Empirical Evidence, Theory and Practice," Papers 2205.07385, arXiv.org.
    7. Emilio Said, 2019. "How Option Hedging Shapes Market Impact," Working Papers hal-02310080, HAL.
    8. Fr'ed'eric Bucci & Michael Benzaquen & Fabrizio Lillo & Jean-Philippe Bouchaud, 2019. "Slow decay of impact in equity markets: insights from the ANcerno database," Papers 1901.05332, arXiv.org, revised Jan 2019.
    9. Frédéric Bucci & Michael Benzaquen & Fabrizio Lillo & Jean-Philippe Bouchaud, 2019. "Slow Decay of Impact in Equity Markets: Insights from the ANcerno Database," Post-Print hal-02323357, HAL.
    10. Emilio Said & Ahmed Bel Hadj Ayed & Alexandre Husson & Frédéric Abergel, 2018. "Market Impact: A systematic study of limit orders," Working Papers hal-01561128, HAL.
    11. Emilio Said & Ahmed Bel Hadj Ayed & Alexandre Husson & Frédéric Abergel, 2018. "Market Impact: A Systematic Study of Limit Orders," Post-Print hal-01561128, HAL.
    12. Emilio Said & Ahmed Bel Hadj Ayed & Alexandre Husson & Fr'ed'eric Abergel, 2018. "Market Impact: A Systematic Study of Limit Orders," Papers 1802.08502, arXiv.org, revised May 2022.
    13. Jonathan Donier & Jean-Philippe Bouchaud, 2015. "Why Do Markets Crash? Bitcoin Data Offers Unprecedented Insights," PLOS ONE, Public Library of Science, vol. 10(10), pages 1-11, October.
    14. Fr'ed'eric Bucci & Iacopo Mastromatteo & Michael Benzaquen & Jean-Philippe Bouchaud, 2019. "Impact is not just volatility," Papers 1905.04569, arXiv.org.
    15. Jonathan Donier & Jean-Philippe Bouchaud, 2015. "Why Do Markets Crash? Bitcoin Data Offers Unprecedented Insights," Post-Print hal-01277584, HAL.
    16. Thibault Jaisson, 2014. "Market impact as anticipation of the order flow imbalance," Papers 1402.1288, arXiv.org.
    17. Weibing Huang & Charles-Albert Lehalle & Mathieu Rosenbaum, 2015. "Simulating and Analyzing Order Book Data: The Queue-Reactive Model," Journal of the American Statistical Association, Taylor & Francis Journals, vol. 110(509), pages 107-122, March.
    18. Paul Jusselin & Mathieu Rosenbaum, 2020. "No‐arbitrage implies power‐law market impact and rough volatility," Mathematical Finance, Wiley Blackwell, vol. 30(4), pages 1309-1336, October.
    19. Olivier Guéant, 2016. "The Financial Mathematics of Market Liquidity: From Optimal Execution to Market Making," Post-Print hal-01393136, HAL.
    20. Frédéric Bucci & Iacopo Mastromatteo & Michael Benzaquen & Jean-Philippe Bouchaud, 2019. "Impact is not just volatility," Post-Print hal-02323182, HAL.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-02014248. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.