Clustering of Trading Activity in the DAX Index Options Market
AbstractTrades in DAX index options with identical maturities cluster around particular classes of strike prices. For example, options with strikes ending on 50 are less traded than options with strikes ending on 00. Clustering is higher when options with close strike prices are good substitutes. The degree of substitution between options with neighboring strikes depends on the strike price grid and options' characteristics. Using regression analysis we analyze the relation between clustering, grid size, and the options' characteristics. To our knowledge this paper is the first to explore how the grid size of strike prices affects options' trading volume.
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Bibliographic InfoPaper provided by University of Bonn, Germany in its series Bonn Econ Discussion Papers with number bgse30_2001.
Date of creation: Nov 2001
Date of revision:
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Clustering; Incidental Truncation; Index Options; Volume;
Other versions of this item:
- Alexander K. Koch & Zdravetz Lazarov, 2005. "Clustering of Trading Activity in the DAX Index Options Market," Royal Holloway, University of London: Discussion Papers in Economics 05/02, Department of Economics, Royal Holloway University of London, revised Mar 2005.
- C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
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