The value of tradeability
AbstractThis paper determines the value of asset tradeability in an option pricing framework. In our model, tradeability is valuable since it allows investors to exploit temporary mis-pricings of stocks. The model delivers several novel insights on the value of tradeability: The value of tradeability is the larger, the higher the pricing efficiency of the market is. Uncertainty increases the value of tradeablity, no matter whether the uncertainty results from noise trading or from new information about the fundamental value of the stock. The value of tradeability is the larger, the longer the illiquid stock cannot be traded and the more trading dates the liquid stock offers. --
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Bibliographic InfoPaper provided by University of Cologne, Centre for Financial Research (CFR) in its series CFR Working Papers with number 10-11.
Date of creation: 2010
Date of revision:
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More information through EDIRC
Tradeability; Liquidity; Option Pricing;
Find related papers by JEL classification:
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-11-06 (All new papers)
- NEP-CFN-2010-11-06 (Corporate Finance)
- NEP-MST-2010-11-06 (Market Microstructure)
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