This study examines the kind of information ainformeda traders have prior to a takeover announcement using options of target firms and elaborates on the cross-sectional relationship between options and stocks around takeover announcements. Financial markets are driven by information and by individuals that generate, process, and disclose this information to the market. Naturally, there have to be individuals who possess more information about a firm or a future event than other market participants. Mergers and acquisitions are particularly interesting events in this regard because they can have significant implications for the firms and stakeholders involved, as well as for the competitive dynamics in the respective market. Because of the large potential price impact of such transactions, traders with private information about a prospective takeover are expected to trade on this information to make a profit. But who are these ainformed tradersa and what kind of information do they possess? This study tries to give a respond to this question.(2008) note that options are the preferred instruments of traders with information about future volatility (but not about the ... IV is not directly observable but can be inferred from an option pricing model like BSM by using the observed marketanbsp;...
|Title||:||The nature of informed option trading: Evidence from the takeover market|
|Publisher||:||Anchor Academic Publishing (aap_verlag) - 2014-02-01|