Study of daily and weekly options introduced by NYSE Euronext: volume transfers, investor types and underlying market volatility.

Summary The objective of this thesis is to study the daily and weekly options on the Dutch market index AEX recently introduced by NYSE Euronext. We consider them along three main lines: first, the impact of their introduction on the volumes of existing longer-dated options. Second, we analyze the different types of investors who trade these options by distinguishing between market members, their customers and market makers. Finally, given the level of information and sophistication of investors who trade short-dated options, we examine the impacts of their trading on the volatility of the underlying market, the volatility of the AEX market index. Our main results reveal a substitution effect of new options for existing monthly options. We find a negative impact of daily and weekly options on monthly option volumes and a negative impact of the introduction of daily options on weekly option volumes. As for investors, we find that daily and weekly options are mainly traded by the clients of market members who turn out to be uninformed and unsophisticated. Regarding the impact of the new options on the market volatility of the underlying assets, we conclude that the level of volatility of the AEX index has increased following the introduction of daily and weekly options due to the fact that these new options are mainly traded by clients, who are uninformed investors.