Presenter: Sebastian Bak Egebjerg, AU

Title: A Model for the Hedging Impact of Option Market Makers

Abstract: We propose a model that embeds the directional impact of Option Market Makers (OMM) delta hedging their option inventory. In extension of existing theoretical contributions that focus on the gamma effect, we include an additional impact when changes to the option inventory are hedged by the OMM (the inventory effect). When the fundamental value of the stock has constant volatility and drift terms, inclusion of a hedging impact implies that the observable stock price features both stochastic volatility and stochastic drift. Focusing on the trading impact implied by the gamma effect in isolation will underestimate the impact in scenarios where the OMM's option inventory changes in a direction that implies trading in the same direction as the gamma impact and vice versa. Using a high frequency data set on SPX option trades, we estimate changes to the net option position of OMMs over an extended period and find that the change is a strong predictor of the end-of-day return on SPX futures. A decomposition of the net delta change into changes due to the gamma effect as well as the inventory effect reveals that both quantities are significant and with impact in line with the model predictions.

Presenter: Tobias Skipper Soussi, AU

Title: Rushes sales and house prices: The divorce discount

Abstract: This paper investigates the impact of rushed house sales, specifically those prompted by divorce, on house prices using comprehensive data from Danish administrative registers. I find that rushed sales, similarly to forced sales typically studied in the literature, result in significant price discounts. I find house price discounts of up to 14\% immediately after divorce. These discounts are attributed to the psychological pressures faced by divorced sellers, which prompt them to expedite the sale process. The study also find that the discount varies with local market conditions, financial constraints, and the presence of joint versus solo ownership. The results highlight the substantial economic consequences of personal distress on the housing market.

PhD presentation as part of mandatory 1st or 3rd year presentation. The time is extended to one hour; the presenter has 40 minutes for the presentation, 5-10 minutes for the discussant, and 5-10 minutes for questions.

Organizers: Stefan Hirth and Anders Merrild Posselt