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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
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    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)

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