François-Heude, Alain and Yousfi, Ouidad (2013): On the liquidity of CAC 40 index options Market.
Preview |
PDF
MPRA_paper_47921.pdf Download (646kB) | Preview |
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 |
---|---|
Original Title: | On the liquidity of CAC 40 index options Market |
English Title: | On the liquidity of CAC 40 index options Market |
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 |
Item ID: | 47921 |
Depositing User: | Ouidad YOUSFI |
Date Deposited: | 02 Jul 2013 07:40 |
Last Modified: | 10 Oct 2019 13:43 |
References: | Amihud, Y., and H. Mendelson, 1986, "Asset Pricing and the Bid-Ask Spread", Journal of Financial Economics, Vol. 17, pp. 223-49. Amihud, Y., and H. Mendelson, 1991, "Liquidity, Maturity and the Yields on US Treasury Securities", Journal of Finance, Vol. 46, pp. 1411-25. Amihud, Y., H. Mendelson, and L.H. Pedersen, 2005, "Liquidity and Asset Prices", Foundations and Trends in Finance, Vol. 1, pp. 269-364. Black, F. and M. Scholes, 1973, "The pricing of options and corporate liabilities", Journal of political Economics, Vol. 81, pp. 637-659. Bollen, N.P., and R.E. Whaley, 2004, "Does Net Buying Pressure Affect the Shape of Implied Volatility Functions ?", Journal of Finance, Vol. 59, pp. 711-53. Brennan, M.J. and A. Subrahmanyam, 1996, "Market Microstructure and Asset Pricing: On the Compensation for Illiquidity in Stock Returns", Journal of Financial Economics, Vol. 41, pp. 441-64. Capelle-Blancard G. and M. Chaudhury, 2001, "Efficiency tests of the French index (CAC 40) option market", McGill Finance Research Centre Working Paper, SSRN, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=283695. Cheng, W.Y. and S. Zhang, 2000, The analytics of reset options, Journal of derivatives, Vol. 8, pp. 59-71. Cho, Y., and R. Engle, 1999, "Modeling the Impact of Market Activity on Bid-Ask Spread in the Options Market", NBER Working Paper. Cont R. and J. da Fonseca, 2002, "Dynamics of implied volatility surfaces", Quantitative Finance, Vol. 2, N° 1, pp. 45-60. Cox, J.C., S. Ross and M. Rubinstein, 1979, "Option pricing: A simplified Approach", Journal of Financial Economics, Vol: 7, pp. 229-264. Datar, V.T., N.Y. Naik, and R. Radcliffe, 1998, "Liquidity and Asset Returns: An Alternative Test", Journal of Financial Markets, Vol. 1, pp. 203-19. Deville, L. and F. Riva, 2007, "Liquidity and Arbitrage in Options Markets: A Survival Analysis Approach", Review of Finance,Vol. 11, n° 3, pp. 497-525. Deville, L., 2004, "Time to Efficiency of the French CAC 40 Index Options Market", EFMA 2004 Basel Meetings Paper. Easley, D., and M. O'Hara, 2003, "Microstructure and Asset Pricing", in: G. Constantinides, M. Harris and R. Stulz (eds.), Handbook of Financial Economics, Amsterdam: Elsevier Science Publishers. Eleswarapu, V.R., 1997, "Cost of Transacting and Expected Returns in the Nasdaq Market", Journal of Finance, Vol. 52, pp. 2113-27. François-Heude, A. and O. Yousfi, 2013, "A generalization of Gray and Whaley's reset option", working paper, presented at the 30^{th} AFFI conference, paper,http://events.em-lyon.com/AFFI/Papers/47.pdf. Frey, R., 1998, "Perfect Option Hedging for a Large Trader", Finance and Stochastics, Vol. 2, pp. 115-41. Garleanu, N., L.H. Pedersen, and A.M. Poteshman, 2009, "Demand-based Option Pricing", Review of Financial Studies, Vol. 22, pp. 4259-4299. Gray, S.F. and R.E. Whaley, 1999, "Reset Put Options: Valuation, Risk Charactheristics, and an Application", Australian Journal of Management, Vol. 24, n° 1, pp 1-20. Gregoriou, A., 2011, "The Liquidity Effects of Revisions to the CAC40 Stock Index", Applied Financial Economics, Vol. 21, n° 4, pp. 333-341. Guo, J.H. and M.W. Hung, 2008, A generalization of Rubinstein's "Pay Now, Choose Later", Journal of Futures Markets. Handa P. and Schwartz R.S., 1996, How best to Supply Liquidity to a Securities Market, The Journal of Portfolio Management, Vol. 22, pp. 44-51. Haug, E. and J. Haug, 2001, "The collector: Who's on first base?", Wilmott Magazine, http://www.wilmott.com/pdfs/010721_collector_02.pdf. Haugen, R.A., and N.L. Baker, 1996, "Commonality in the Determinants of Expected Stock Returns", Journal of Financial Economics, Vol. 41, pp. 401-39. Johnson, H., 1987, Options on the maximum or the minimum of several assets, Journal of Financial and Quantitatives Analysis, Vol. 22, pp. 277-283. Kamara, A., 1994, "Liquidity, Taxes and Short-term Treasury Yields", Journal of Financial and Quantitative Analysis, Vol. 29, pp. 403-17. Kamara, A. and T. Miller, 1995, "daily and intradaily tests of put-call parity, Journal of Financial and Quantitative Analysis, Vol. 30, pp 519-539. Kermiche, L., 2009, "Dynamics of Implied Distributions: Evidence from the CAC 40 Options Market", Finance, Vol. 30, n° 2. pp. 64-103. Kermiche, L., 2008, "Modélisation de la surface de volatilité implicite par processus à sauts", Finance, Vol. 29, n° 2, pp. 57-101. Lia, S.L. and C.W. Wang, 2003, The valuation of reset options with multiple strike resets and reset dates, Journal of Futures Markets, Vol. 23, pp. 87-107. Liu, W., 2006, A Liquidity-Augmented Capital Asset Pricing Model, Journal of fi nancial Economics, Vol. 82, n° 3, pp. 631-671. Margrabe, W., 1978, The value of an option to exchange one asset for another, Journal of Finance, Vol. 33, pp. 177-186. Marcellino, G. and A. Zanette, 2008, "pricing cliquet options by tree methods", working paper, www.dies.uniud.it/.../working-paper-difi.html. Mittnik, S., and S. Rieken, 2000, "Put-Call Parity and the Informational Efficiency of the German DAXIndex Options Markets", International Review of Financial Analysis, Vol. 9, n°3, pp. 259--279. Rendleman, R.J. and B.J. Bartter, 1980, "The pricing of options on debt securities", Journal of Financial and Quantitative Analysis, Vol. 15, pp. 11-24. Riva, F. and L. Deville, 2004, "The determinants of the time to efficiency in options markets : a survival analysis approach", Economie financière. Roll, R., E. Schwartz and A. Subrahmanyam, 2007, "Liquidity and the Law of one price: The case of the futures/cash basis", Jouranl of Finance, Vol. 62, pp. 2201-2234. Rubinstein, M., 1991, Pay now, choose later, Risk, Vol. 4, p.13. Stultz, R., 1991, Options on the minimum or the maximum of two risky assets: analysis and applications", Journal of Financial Economics, Vol. 10, pp. 161-185. Windcliff, H.A., P.A. Forsyth. and K.R. Vetzal, 2003, "Numerical Methods for Valuing Cliquet Options." |
URI: | https://mpra.ub.uni-muenchen.de/id/eprint/47921 |