About
Welcome! I am Yue Zhang, a final-year PhD Candidate in Finance at Bayes Business School, City St George’s, University of London. My PhD supervisors are Prof. Aneel Keswani, Dr Xiao Xiao, and Dr Mehrshad Motahari. I was previously a Visiting Scholar at the University of Cambridge.
My research focuses on institutional investors and asset pricing, with a particular interest in financial intermediation, market structure, and derivatives.I am on the job market in the 2026–2027 cycle.
Research
Job Market Paper
Cash versus In-Kind Settlement and ETF Arbitrage Efficiency
Exchange-traded funds (ETFs) can settle creations and redemptions with authorized participants (APs) using a combination of securities transferred in kind and cash. I document that 75% of U.S. corporate bond ETFs use more cash in these transactions than the SEC permits for in-kind classification. I show theoretically and empirically that variation in the use of cash versus in-kind settlement creates asymmetric AP arbitrage incentives across ETF creations and redemptions. In-kind settlement exposes APs to the cost of holding illiquid bonds, whereas cash settlement requires them to surrender liquid assets. Consistent with this mechanism, I find that cash settlement weakens creation arbitrage but strengthens redemption arbitrage, with the latter nearly five times as strong as under in-kind settlement. This asymmetry is stronger when underlying bonds are more illiquid and among APs with greater regulatory capacity. These findings show how settlement structure reveals the constraints underlying AP arbitrage and how bank regulatory capacity spills over to ETF markets through APs.
Presented at: 2026 Finance PhD Research Days (Bayes Business School), 2026 Pre-EFA PhD Program Poster Session, Junior Academics Research Seminars (JARS) in Finance (2026-2027, scheduled), Bayes-Bristol Finance Workshop (scheduled)
Working Papers
Decoding Derivatives Use by ETFs
We provide the first systematic study of derivative use by exchange-traded funds (ETFs). Over half of ETFs use derivatives, and do so to a far greater extent than mutual funds. Exploiting a 2019 regulatory change that permitted the in-kind transfer of certain option positions, we provide evidence from a triple-difference design that option usage among ETFs rises sharply relative to mutual funds, beyond the corresponding change in futures usage following the rule. The increase is driven primarily by new product entry. ETFs use derivatives to compete for investor flows along both price and non-price dimensions: futures allow ETFs to lower fees, while options allow ETFs to reshape return distributions to suit investor needs, increase distribution yields, and reduce investors' tax burdens. Our findings highlight derivative implementation as an important dimension of ETF product differentiation and investor demand.
Presented at: 2026 EasternFA, 2026 AFA Poster Session, 2025 FMA, 2025 Trans-Atlantic Doctoral Conference, 2025 New Perspective and New Products in Asset Management, 2025 Finance PhD Research Days (Bayes Business School), 2025 Tri-City Bridge Workshop Poster Session, 2025 Cancun Asset Pricing and Derivatives conference*, Development Bank of Japan*, Bristol University*, Católica Porto Business School*, Hong Kong Baptist University*, Nottingham University*, Vienna Graduate School of Finance*
*Presented by a coauthor
Active Option Portfolio Management: Evidence from Daily ETF Holdings
We use daily ETF holdings to examine institutional option trading and show that option ETFs actively trade options beyond mechanical creation and redemption activities. Their active option trading is mainly drived by deviations from ETFs' greek exposure targets.
Presented at: Bristol University*, King's College London*
*Presented by a coauthor
Under Pressure: Allegations and Behavior of Mutual Fund Managers
We investigate the impact of allegation occurrence on mutual funds with mandatory disclosure. We find that investors avoid mutual funds involved in allegations and more likely to withdraw investments from mutual funds which are tainted to allegation in the subsequent two months. Interestingly, when considering the response of fund managers, allegation disclosure could cause excessive stress for manager as reflected in risk-shifting behaviour and more conservative trading. There is little evidence that more severe allegation leads to higher investor outflows. We find that stress of mutual fund managers is sensitive to the allegation fine amount, as they perform more conservative trades with larger fines.
Teaching
Bayes Business School
IF2209 Derivatives & FR2211 Derivatives, Trading & Hedging (2025/26)
IF2209 Derivatives & FR2211 Derivatives, Trading & Hedging (2024/25)