Price monotonicity violations during stock market crashes: Evidence from the SSE 50 ETF options market
实证检验中国期权市场在股市崩盘和交易限制期间的价格违反模式，发现崩盘促使知情交易者频繁调整看跌期权头寸，加剧信息误解和过度反应，而监管冲击降低信息效率但不影响期权市场的价格发现主导地位。
Abstract This study empirically tests whether price violations, as defined by Bakshi, Cao, and Chen (2000), show different patterns in response to market shocks. Specifically, we analyze the Chinese options market during a period covering a stock market crash and a series of trading restrictions in the Chinese derivatives markets. Our results confirm the significant changes of the defined violations in the face of unexpected shocks, and more importantly, we interpret such variations from the perspective of information spillovers. Our findings suggest that the stock market crash prompts informed traders in the Chinese options market to frequently adjust their positions on put options, exacerbating the misunderstandings and overreactions to new information. Further, the regulatory shock in the derivatives markets diminishes the efficiency of information incorporation for both options and spot markets but does not affect the dominance of the Chinese options market in price discovery.