Date of Award
Spring 6-13-2025
Document Type
Masters Thesis
Degree Name
M.S. in Computer Science
Organizational Unit
Daniel Felix Ritchie School of Engineering and Computer Science, Computer Science
First Advisor
Mario Alberto Lopez
Second Advisor
Alex Stevens
Copyright Statement / License for Reuse
All Rights Reserved.
Keywords
Financial options, Market design, Market microstructure, Trade classification
Abstract
Modern options markets clear each strike in isolation, leaving cross-strike arbitrage unexploited. This thesis applies a payoff-dominant clearing mechanism to realized trades—roughly 2 000 Cboe VIX option executions from June–November 2016—after classifying each trade’s side and bundling by expiration. Three optimization formulations are tested: a fractional linear program (LP), a mixed-integer LP, and a pure integer program. On a 10-core laptop every bundle solves in < 0.5 s. The LP captures the greatest surplus, yet the integer models recover nearly as much while filling whole contracts and holding only modest margin. Results reveal persistent, albeit small, inefficiencies in executed trades and demonstrate that an integral cross-strike auction could operate in real time. The accompanying C/Gurobi code is modular and readily extendable to early-exercise options. Trade-level evidence thus supports redesigning exchange clearing to consider the complete option book.
Copyright Date
6-2025
Publication Statement
Copyright is held by the author. User is responsible for all copyright compliance.
Rights Holder
Juan Andrés Malaver Alvarado
Provenance
Received from ProQuest
File Format
application/pdf
Language
English (eng)
Extent
89 pgs
File Size
433 KB
Recommended Citation
Malaver Alvarado, Juan Andrés, "Optimizing Option Market Clearing" (2025). Electronic Theses and Dissertations. 2587.
https://digitalcommons.du.edu/etd/2587