Who buys options from whom? The role of options in an economy with heterogeneous

Huang, J (2000) Who buys options from whom? The role of options in an economy with heterogeneous. Working Paper. The Department of Accounting and Finance, Lancaster University.

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Abstract

In this paper we first show that call options, together with the market portfolio, are sufficient to obtain Pareto efficiency while put options are not. Next we investigate how investors' heterogeneous preferences and beliefs affect their investment strategies and who buys options from whom. We show that an investor buys options with strike prices below a threshold from investors who have lower cautiousness/optimism while selling options with strike prices above the threshold to investors who have higher cautiousness/optimism. We also show that the investor's threshold increases with increases in his cautiousness and optimism.

Item Type:
Monograph (Working Paper)
Uncontrolled Keywords:
/dk/atira/pure/subjectarea/aacsb/disciplinebasedresearch
Subjects:
ID Code:
48605
Deposited By:
Deposited On:
11 Jul 2011 21:01
Refereed?:
No
Published?:
Published
Last Modified:
24 Nov 2020 09:55