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Order aggressiveness during the subprime financial crisis

English Abstract

This thesis analyzes the order aggressiveness and order submission strategies in the United States option market, namely, the Chicago Board Option Exchange (CBOE). With over 900 millions observations, we find that traders react more aggressive when they observe aggressive orders on the same side. The observations of order cancellations result in the herding behaviors and the expectation changes by the investors. On our ordered probit analysis, we find that the investors are aggressive when (i) longer the order processing time; (ii) the closer the time to expiration; and (iii) the narrower the spread. Additionally, traders are more aggressive in trading in-the-money options than out-of-the-money options. 1 I specially thank to my thesis advisor, Dr. Cheung, M.Y. William, for stimulating and inspiring me my ways of thinking on this field of market microstructure. Without him, I do not think I can complete this research. My gratitude also goes to one of my best friends, Kejing Liu. He directs me to use the computer software, SAS®, and provides me useful comments on this research. Last but not least, I am deeply indebted to my beloved families who supported me all the way here mentally and financially.

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Cheng, Lammers


Faculty of Business Administration


Department of Finance and Business Economics


M. Sc.



Risk management

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