Does Options Trading Deter Real Activities Manipulation?

2021 ◽  
Author(s):  
Mahmoud Delshadi ◽  
Zabihollah Rezaee ◽  
Mahmoud Hosseinniakani
Keyword(s):  
Options Trading ◽  
Real Activities Manipulation

ISLAMIC COMMERCIAL LAW

1997 ◽  
Vol 14 (3) ◽  
pp. 17-37
Author(s):  
Mohammad Hashim Kamali
Keyword(s):  
Risk Reduction ◽  
Basic Question ◽  
Depth Information ◽  
Commercial Law ◽  
Other Hand ◽  
Legal Perspective ◽  
Financial Speculation ◽  
The Subject ◽  
Options Trading

This essay is presented in two sections. Section one is devoted to amarket analysis of options, and section two to a Shari'ah perspective onoptions trading. There is no real shortage of information in the operationalprocedures of options and the various ways in which options areutilized as trading vehicles and hedging and risk-reduction devices. Onthe other hand, there is a shortage of in-depth information analyzingoptions trading from the perspective of the Shari'ah. The second part ofthis essay is tentative, in part because certain aspects of the issue needfurther development and research. The literature on the subject is in itsearly stages and has not reached a stage where consensus on issues canbe identified. This is borne out perhaps by the divided opinion that wehave at present over the basic question of the validity or nonvalidity ofoptions from an Islamic legal perspective. I shall review these twoopposing currents of opinion in due course. Suffice it here to note thatthis presentation does not seek to advocate the validity of those varietiesof options which either directly or indirectly proceed on the charging offixed interest to accounts. This may be said to be one of the distinctivefeatures of the Shari'ah perspective on options-just as it is of all varietiesof commercial transactions in Islamic law.My review of the mechanics of options trading in the first section ofthis essay broadly indicates that options trading does not proceed oncharging of fixed interest, nor does it involve unwarranted risk takingand uncertainty (gharur). Options trading has a logic of its own, whichis dominated by the idea of risk reduction and hedging against excessivelylarge positions in its underlying assets. From the perspective ofIslamic law this aspect of options is attractive and hence, from this perspectiveI make the case for the legality of options. I may also add herein passing that options trading cannot be equated with gambling or overindulgencein financial speculation. as it is basically designed to ...

Estimating Risk and Hedging in Options Trading

2007 ◽  
Author(s):  
Ramesh VNM Kappagantula ◽  
Subhash Reddy Murthy
Keyword(s):  
Options Trading

scholarly journals Options trading strategy based on ARIMA forecasting

2020 ◽  
Vol 4 (2) ◽  
pp. 111-127
Author(s):  
Pierre Rostan ◽  
Alexandra Rostan ◽  
Mohammad Nurunnabi
Keyword(s):  
Composite Index ◽  
Garch Model ◽  
Trading Strategy ◽  
Credit Crisis ◽  
Strike Price ◽  
Index Options ◽  
Content Type ◽  
Option Trading ◽  
Auto Regressive ◽  
Options Trading

Purpose The purpose of this paper is to illustrate a profitable and original index options trading strategy. Design/methodology/approach The methodology is based on auto regressive integrated moving average (ARIMA) forecasting of the S&P 500 index and the strategy is tested on a large database of S&P 500 Composite index options and benchmarked to the generalized auto regressive conditional heteroscedastic (GARCH) model. The forecasts validate a set of criteria as follows: the first criterion checks if the forecasted index is greater or lower than the option strike price and the second criterion if the option premium is underpriced or overpriced. A buy or sell and hold strategy is finally implemented. Findings The paper demonstrates the valuable contribution of this option trading strategy when trading call and put index options. It especially demonstrates that the ARIMA forecasting method is a valid method for forecasting the S&P 500 Composite index and is superior to the GARCH model in the context of an application to index options trading. Originality/value The strategy was applied in the aftermath of the 2008 credit crisis over 60 months when the volatility index (VIX) was experiencing a downtrend. The strategy was successful with puts and calls traded on the USA market. The strategy may have a different outcome in a different economic and regional context.

A neural network approach to measure real activities manipulation

2015 ◽  
Vol 42 (5) ◽  
pp. 2313-2322 ◽  
Author(s):  
Jesper Haga ◽  
Jimi Siekkinen ◽  
Dennis Sundvik
Keyword(s):  
Neural Network ◽  
Network Approach ◽  
Neural Network Approach ◽  
Real Activities Manipulation

Informed options trading around holidays

2021 ◽  
Author(s):  
Doojin Ryu ◽  
Jinyoung Yu
Keyword(s):  
Options Trading

The effect of real activities manipulation on going concern audit opinions for financially distressed companies

2018 ◽  
Vol 17 (4) ◽  
pp. 514-539
Author(s):  
Hongkang Xu ◽  
Mai Dao ◽  
Jia Wu
Keyword(s):  
Audit Quality ◽  
Positive Association ◽  
Content Type ◽  
Going Concern ◽  
Accruals Management ◽  
Reporting Decisions ◽  
Going Concern Opinion ◽  
Distressed Firms ◽  
Real Activities Manipulation ◽  
Auditor Reporting

Purpose This study aims to examine the effect of real activities manipulation (RAM) on auditors’ decision of issuing going concern (GC) opinions for distressed companies. Design/methodology/approach This study estimates and examines three types of RAM: reduction of discretionary expenses, sales manipulation and overproduction. It investigates the effect of RAM on auditor reporting conservatism by including the three measures of RAM methods in logistic regressions that explain the issuance of going concern opinions. The authors perform the analysis specifically on distressed firms for 2004-2013 period. Findings This study finds a significant and positive association between RAM and the likelihood of receiving going concern opinion in the financial distressed firm sample, suggesting that client’s abnormal business activity affects the auditor reporting conservatism. Practical implications This study provides evidence that auditors make going concern reporting decisions in consideration of the client’s abnormal operating decisions and management’s opportunism. Originality/value Recent literature argues that auditors have little recourse other than to resign if a client uses RAM to impact earnings or the financial statements, and hence the enhanced audit quality in the post-SOX period is due to the shift from using accruals management to RAM (Cohen et al., 2008; Chi et al., 2011; Kim and Park, 2014). The evidence provided in this study indicates that auditors report more conservatively (rather than simply resign) in response to the aggressive RAM.

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