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The Market for Equity Options in the 1870s

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  • Kairys, Joseph P, Jr
  • Valerio, Nicholas, III

Abstract

The introduction of exchange-traded options in 1973 led to explosive growth in the stock options market, but put and call options on equity securities have existed for more than a century. Prior to the listing of option contracts, trading was conducted in an order-driven over-the-counter market. From 1873 to 1875, quotes for options contracts were published weekly in The Commercial and Financial Chronicle during a period that saw extensive marketing efforts by a number of brokerage firms. In this article, the authors examine these quotes to determine why this seemingly sophisticated market existed for only a brief period in financial history. Copyright 1997 by American Finance Association.

Suggested Citation

  • Kairys, Joseph P, Jr & Valerio, Nicholas, III, 1997. "The Market for Equity Options in the 1870s," Journal of Finance, American Finance Association, vol. 52(4), pages 1707-1723, September.
  • Handle: RePEc:bla:jfinan:v:52:y:1997:i:4:p:1707-23
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    Citations

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    Cited by:

    1. Maxime Charlebois & Stephen Sapp, 2007. "Temporal Patterns in Foreign Exchange Returns and Options," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(2‐3), pages 443-470, March.
    2. Chambers, David, 2019. "Commodity Option Pricing Efficiency before Black Scholes Merton," CEPR Discussion Papers 13975, C.E.P.R. Discussion Papers.
    3. Molintas, Dominique Trual, 2021. "Black Scholes Model," MPRA Paper 110124, University Library of Munich, Germany.
    4. Flandreau, Marc & Oosterlinck, Kim, 2012. "Was the emergence of the international gold standard expected? Evidence from Indian Government securities," Journal of Monetary Economics, Elsevier, vol. 59(7), pages 649-669.
    5. Lambrecht, Bart M., 2017. "Real options in finance," Journal of Banking & Finance, Elsevier, vol. 81(C), pages 166-171.
    6. Oosterlinck, Kim & Ureche-Rangau, Loredana & Vaslin, Jacques-Marie, 2014. "Baring, Wellington and the Resurrection of French Public Finances Following Waterloo," The Journal of Economic History, Cambridge University Press, vol. 74(4), pages 1072-1102, December.
    7. Robert Brooks & Joshua A. Brooks, 2017. "An Option Valuation Framework Based On Arithmetic Brownian Motion: Justification And Implementation Issues," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 40(3), pages 401-427, September.
    8. Mixon, Scott, 2009. "Option markets and implied volatility: Past versus present," Journal of Financial Economics, Elsevier, vol. 94(2), pages 171-191, November.
    9. Anne L. Murphy, 2009. "Trading options before Black‐Scholes: a study of the market in late seventeenth‐century London1," Economic History Review, Economic History Society, vol. 62(s1), pages 8-30, August.
    10. Oosterlinck, Kim & Ureche-Rangau, Loredana & Vaslin, Jacques-Marie, 2019. "Aristocratic Privilege. Exploiting “Good†Institutions," CEPR Discussion Papers 14071, C.E.P.R. Discussion Papers.
    11. Bell, Adrian R. & Brooks, Chris & Dryburgh, Paul, 2007. "Interest rates and efficiency in medieval wool forward contracts," Journal of Banking & Finance, Elsevier, vol. 31(2), pages 361-380, February.
    12. Haug, Espen Gaarder & Taleb, Nassim Nicholas, 2011. "Option traders use (very) sophisticated heuristics, never the Black-Scholes-Merton formula," Journal of Economic Behavior & Organization, Elsevier, vol. 77(2), pages 97-106, February.
    13. Lim, Terence & Lo, Andrew W. & Merton, Robert C. & Scholes, Myron S., 2006. "The Derivatives Sourcebook," Foundations and Trends(R) in Finance, now publishers, vol. 1(5–6), pages 365-572, April.
    14. Geoffrey Poitras, 2012. "From the Renaissance Exchanges to Cyberspace: A History of Stock Market Globalization," Chapters, in: Geoffrey Poitras (ed.), Handbook of Research on Stock Market Globalization, chapter 3, Edward Elgar Publishing.

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