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The Information Imbedded in the Trading Volume of Currency Options Yaffa Machnes Graduate School of Business Administration Bar Ilan University ISRAEL.

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Presentation on theme: "The Information Imbedded in the Trading Volume of Currency Options Yaffa Machnes Graduate School of Business Administration Bar Ilan University ISRAEL."— Presentation transcript:

1 The Information Imbedded in the Trading Volume of Currency Options Yaffa Machnes Graduate School of Business Administration Bar Ilan University ISRAEL fax: Tel:

2 References Anthony, J.H. (1988). The interrelation of stock and option market trading-volume data. Journal of Finance, 43, Chakravarty, S., Gulen, H., & Mayhew, S. (2004). Informed trading in stock and option markets. Journal of Finance, June; 59(3): Chakravarty, S.Gulen, H.Mayhew, S.Journal of Finance, Easley, D., O'Hara, M., & Srinivas, P. S. (1998). Option volume and stock prices: Evidence on where informed traders trade. Journal of Finance, 53, Sarwar, G. (2003). The interrelation of price volatility and trading volume of currency options. The Journal of Futures Markets, 23(7),

3 The Model - "representative" exchange rate on day t - total volume of calls on US $ traded in TASE on day t - total volume of puts on US $ traded in TASE on day t

4 Table 1: Exchange Rate as a Function of Trading Volume of $ US Options: Augmented Dickey- Fuller Test Equation. Least Squares Method after logarithmic transformation. Regression coefficients multiplied by 10. Previous trading day On the trading day Explanatory variable (2.5) (4.3) Constant 8.8 (3.3) 19.9 (6.2) Calls volume -5.8 (1.9) (5.2) Puts volume F-statistics R squared n Durbin Watson Numbers in parenthesis are t values

5 Table 2: Exchange Rate as a Function of PCR and Trading Volume of $ US Options: Augmented Dickey-Fuller Test Equation. Least Squares Method after logarithmic transformation. Regression coefficients multiplied by 10. Previous trading day On the trading day Explanatory variable (2.3) (4.3) Constant 2.9 (2.1) 6.2 (3.7) Calls+puts volume -6.5 (2.9) (5.7) Put/call ratio F R squared n Durbin- Watson Numbers in parenthesis are t values


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