Li Wang, assistant professor of banking and finance, published new research in the Journal of Financial Economics on pre-trade hedging.
Wang and her co-authors find evidence consistent with previously unrecognized market manipulation by broker-dealers. Specifically, that pre-trade hedging, which is distinct from front-running, alters prices at which derivative trades occur. The team shows this behavior is intentional by exploiting variation in the design of structured equity products (SEPs).