Machine learning and AI are transforming investing by enabling data-driven decision-making, uncovering hidden patterns, and automating complex strategies. From algorithmic trading and portfolio optimization to risk management and sentiment analysis, AI-driven models process vast amounts of data with speed and precision, identifying opportunities that traditional methods might miss. Most ML …

Liquidity is an overlooked research area, yet it plays a crucial role in financial markets. Trading system developers often use the bid-ask spread as a proxy for liquidity, but this approach is less effective in the options market. Reference proposes a method for integrating liquidity into the option pricing …

Bitcoin options are derivative contracts that grant investors the right, but not the obligation, to buy or sell Bitcoin at a predetermined price before a specified expiration date. Major cryptocurrency exchanges offer options on Bitcoin and other cryptocurrencies, including select tokens. However, the vast majority of trading takes place on …

A covered call ETF is an exchange-traded fund that employs a covered call strategy to generate income while maintaining exposure to the underlying assets. This strategy involves holding a portfolio of stocks and selling (or “writing”) call options on those stocks to collect option premiums. Covered call ETFs are particularly …

Dispersion in the stock market refers to the degree of variation in individual stock returns within an index or sector. High dispersion indicates significant differences in performance among stocks. Conversely, low dispersion suggests that stocks are moving more uniformly, often driven by broad market trends. Usually, dispersion is measured by …

The decomposition of the volatility risk premium (VRP) into overnight and intraday components is an active area of research. Most studies indicate that the VRP serves as compensation for investors bearing overnight risks. Reference continues this line of research, with its main contribution being the decomposition of the variance …

A significant amount of research has focused on at-the-money (ATM) and out-of-the-money (OTM) options due to their liquidity and leverage effects. However, little attention has been given to in-the-money (ITM) options. Reference addresses this gap by studying ITM options, particularly in the context of retail traders. The author pointed …

Unlike long-dated options, short-dated options incorporate not only diffusive volatility but also jump risks. The commonly used VIX and SKEW indices cannot clearly identify the jump risk component in options volatility. To better isolate and present the jump risk component, Reference developed a stochastic jump volatility model that includes …

Options, particularly short-dated ones, are gaining popularity among retail traders, with their trading volume increasing significantly. While some research argues that short-dated options do not impact the market, certain market practitioners hold opposing views. Reference investigated the risks associated with short-dated options order flow. It examined the effective trading …

Market manipulation refers to intentional actions taken to distort the normal functioning of financial markets, often to benefit specific individuals or entities at the expense of others. These actions can include spreading false information, rigging prices, or creating artificial demand or supply. A notable example is the LIBOR manipulation scandal, …