Congratulations to Professors: Haim Kedar-Levy,Elroi Hadad, Gitit Gur-Gershgoren
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Newly Published Paper Today Congratulations to Professor Osamah Alkhazali
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Participation and Post Event Survey Results
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Volume 15, Numbers 1 & 2
March / June 2011

Quarterly publication of the Multinational Finance Society, a non-profit corporation     ISSN 1096-1879

Abnormal Trading in the S&P 500 Index Options Prior to the September 11 Attacks?
(Multinational Finance Journal, 2011, vol. 15, no. 1/2, pp. 1-46)

Wing-Keung Wong
Hong Kong Baptist University, Hong Kong
Howard E. Thompson
University of Wisconsin-Madison, USA
Kweehong Teh
National University of Singapore, Singapore

After the September 11 attacks, several major newswires reported that there were insiders who tried to profiteer from the options market in anticipation of the event. We use the Student's t-statistics and several non-parametric statistics to test whether there was abnormal trading in S&P 500 (SPX) index options prior to the September 11 attacks. Our findings from the out-of-the-money (OTM), at-the-money (ATM) and in-the-money (ITM) SPX index put options and ITM SPX index call options lead us to reject the null hypothesis that there was no abnormal trading in these contracts prior to the September 11 attacks. We also find evidence consistent with three bearish speculation strategies, namely the Put Purchase strategy, the Put Bear Spread strategy, and the Naked ITM Call Write strategy. In addition, we conclude that there is evidence of abnormal trading in the September 2001 OTM, ATM and ITM SPX index put options immediately after the 9-11 attacks. We also employ the CBOE VIX to confirm the conclusion drawn from the call and put options. This, in turn, is consistent with insiders anticipating the 9-11 attacks.

Keywords: 9-11 attacks, put options, call options, SPX index, Student's t-statistics, non-parametric statistics.

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Heterogeneous Basket Options Pricing Using Analytical Approximations
(Multinational Finance Journal, 2011, vol. 15, no. 1/2, pp. 47-85)

Georges Dionne
HEC Montreal, Canada
Genevieve Gauthier
HEC Montreal, Canada
Nadia Ouertani
LEFA, ISCAE Manouba University, Tunisia
Nabil Tahani
York University, Canada

This paper proposes the use of analytical approximations to price an heterogeneous basket option combining commodity prices, foreign currencies and zero-coupon bonds. The performance of three moment matching approximations is examined: inverse gamma, Edgeworth expansion around the lognormal and Johnson family distributions. Since there is no closed-form formula for basket options, Monte Carlo simulations are carried out to generate the benchmark values. A simulation experiment on a set of options based on a random choice of parameters is performed. The results show that the Edgeworth-lognormal and Johnson distributions give the most accurate results. (JEL: C15, C63, F31, G13).

Keywords: Basket Options, Options Pricing, Analytical Approximations, Monte Carlo Simulation

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The Role of Realised Volatility in the Athens Stock Exchange
(Multinational Finance Journal, 2011, vol. 15, no. 1/2, pp. 87-124)

Dimitrios D. Thomakos
University of Peloponnese, Greece
Rimini Centre for Economic Analysis, Italy
Michail S. Koubouros
City College and University of Liverpool, UK

Using a newly developed dataset of daily, value-weighted market returns we construct and analyze the monthly realized volatility of the Athens Stock Exchange (A.S.E.) from 1985 to 2003. Our analysis focuses on the distributional and time series properties of the realized volatility series and on assessing the connection between realized volatility and returns through a multi-factor asset pricing model. In particular, we find strong evidence on the existence of a volatility feedback effect and a leverage effect, and on the existence of asymmetries between lagged returns and volatility. Furthermore, we examine the cross-sectional distribution of unconditional loadings on the realized risk factor(s) for different sets of characteristics-sorted common stock portfolios. We find that realized risk is a significantly priced factor in A.S.E. and its high explanatory power for the cross-section of portfolio average returns is independent of any return variation related to the market (CAPM) or size and book-to-market (Fama-French) factors. We discuss our findings in the context of the recent literature on realized volatility and feedback effects, as well as the literature on the pricing power of realized risk (JEL: G12)

Keywords: realized volatility, leverage effect, volatility feedback effect, asset pricing, A.S.E.

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The Predictability of Non-Overlapping Forecasts: Evidence from a New Market
(Multinational Finance Journal, 2011, vol. 15, no. 1/2, pp. 125-156)

Manolis G. Kavussanos
Athens University of Economics and Business, Greece
Ilias D. Visvikis
ALBA Graduate Business School, Greece

This paper investigates the short-run forecasting performance, in the relatively new and fairly unresearched futures market of Greece. Forecasts from univariate (ARIMA) and multivariate (VAR, VECM and SURE-VECM) linear time-series models indicate that cash returns can be more accurately forecasted, for all forecast horizons, when forecast specifications contain information from both lagged cash and futures returns, than from specifications that utilize information only from lagged cash returns. On the other hand, futures return forecasts are not enhanced in accuracy when lagged cash returns are employed for almost all forecasts. This verifies that at almost all forecasting horizons futures returns contain significantly more and different information than that embodied in current cash returns. Moreover, all time-series models generate more accurate cash and futures forecasts than the forecasts obtained by the random walk model. (JEL: G13, G14, G15)

Keywords: Cointegration; VECM and ARIMA Models; Forecasting; Futures Markets; Emerging Markets; Predictability.

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