On the liquidity of CAC 40 index options Market

François-Heude, Alain and Yousfi, Ouidad (2013): On the liquidity of CAC 40 index options Market.

Abstract

Daily data available between May 2005 and August 2012 show the presence of a considerable number of outstanding PXA contracts that have not expired and been offset by taking or making delivery. The current paper concludes that CAC 40 index options displays some illiquidity problems, particularly long term maturity options that are deep out or in the money. To enhance liquidity, we test the generalized reset GR option of François-Heude and Yousfi (2013) in the PXA options' market. Our preliminary results show a significant and positive effect on the liquidity of PXA options in several ways.

• Item Type: MPRA Paper
• Language: English
• Keywords: strike reset, option, PXA, liquidity, reset option.
• Subjects: G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates; G - Financial Economics > G1 - General Financial Markets > G13 - Contingent Pricing ; Futures Pricing

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