Bear Stearns' Alan "Ace" Greenberg, a former chief executive who currently serves as chair of its executive committee, told CNBC that the liquidity rumors surrounding the company are "totally ridiculous."
"It's ridiculous, totally ridiculous," he told CNBC.
Greenberg's comments came after Bear Stearns shares had fallen more than 11 percent to their lowest the lowest in five years. Bear Stearns shares, which have since regained some lost ground, have shed nearly 30 percent since the end of January.
However, Greenberg's comments did little to calm option traders' nerves, according to Rebecca Engmann Darst of Interactive Brokers. According to Darst, there has been a steep rise in the implied volatility of Bear Stearns options, a sign that option traders anticipate a change in the price of Bear Stearns stock.
The implied volatility of Bear Stearns' at-the-money 60 call is now reading 107 percent, compared with its historic volatility on all Bear Stearns options at about 54 percent, Darst said.