This article investigates how options affect the volatility of the underlying equity market by using a quasi-natural experiment—the introduction of weekly options on individual stocks. The author examines the change in crash risk surrounding the introduction of weekly options by using a difference-in-difference approach that incorporates a control sample identified through propensity score matching. Among the six proxies for crash risk that are adopted, the extreme value theory (EVT)–based VaRs are better explained by the theoretically important determinant factors proposed in prior studies. However, no measure of the EVT-based VaR is significantly affected by the introduction of weekly options. The other four measures of crash risk, which are extensively used in prior studies, are not adequately explained by the proposed determinants and they do not become significantly higher for the optioned stocks following the introduction of weekly options. The author uses machine-learning methods, such as a regression tree model and a random forest model, to better capture the nonlinearity and high-order interactions that may be inherent in the relationship between the introduction of weekly options and crash risk. The results confirm that the introduction of weekly options is not important in explaining the crash risk of the underlying stocks. The author also examines the realized volatility of the underlying stocks and finds that it is not significantly affected by the introduction of weekly options. This study contributes to the literature on the impacts of derivatives on the underlying asset market and provides implications for empirical model specifications for crash risk studies. TOPICS: Options, big data/machine learning Key Findings • The introduction of weekly options leads to an enormous increase in short-life options, which can significantly change the investment and hedging opportunities for investors. • Our study focuses on the possible impact of weekly options on the crash risk of the underlying stocks because hedging and trading activities involving certain short-life options may impose considerable pressure on the stock price in the same direction as the price movement and make the underlying stocks more crash-prone. • Our results suggest that the introduction of weekly options does not cause a significant increase in the crash risk or the realized volatility of the underlying stocks.

中文翻译：

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期权如何影响基础股票市场的波动性？引入每周期权的证据

本文通过准自然实验研究了期权如何影响基础股票市场的波动性，即对单个股票引入每周期权。作者通过采用差异差异方法（结合了通过倾向得分匹配确定的控制样本）研究了引入每周期权的崩溃风险的变化。在采用的六种崩溃风险代理中，基于极值理论（EVT）的VaR可以通过先前研究中提出的理论上重要的决定性因素得到更好的解释。但是，采用每周期权不会明显影响基于EVT的VaR。在先前的研究中广泛使用的其他四项碰撞风险度量，建议的决定因素不能充分解释这些因素，并且在引入每周期权之后，对于期权股票而言，它们不会显着提高。作者使用机器学习方法，例如回归树模型和随机森林模型，来更好地捕获非线性和高阶交互，这可能是每周期权引入和崩溃风险之间固有的关系。结果证实，每周期权的引入对于解释标的股票的崩盘风险并不重要。作者还研究了基础股票的已实现波动，并发现引入每周期权不会对其产生重大影响。这项研究为有关衍生品对基础资产市场的影响的文献做出了贡献，并为崩溃风险研究的经验模型规范提供了启示。主题：期权，大数据/机器学习主要发现•每周期权的引入导致短期期权的大量增加，这可以显着改变投资者的投资和对冲机会。•我们的研究集中于每周期权对标的股票的崩盘风险的可能影响，因为涉及某些短期期权的对冲和交易活动可能在与价格走势相同的方向上对股票价格施加相当大的压力，从而使标的股票产生股票更容易崩溃。