IDEAS home Printed from https://ideas.repec.org/p/hol/holodi/0502.html

Clustering of Trading Activity in the DAX Index Options Market

Author

Listed:

Abstract

A common contention is that more liquid financial contracts draw trading volume from contracts for which they are close substitutes. This paper tests this hypothesis by analyzing clustering of trading activity in DAX index options. Contracts 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. The degree of substitution between options with neighboring strikes depends on the strike price grid and options’ characteristics. Our empirical analysis finds a positive relation between clustering and substitutiability between option contracts, providing support to the initial hypothesis.

Suggested Citation

  • 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.
    • Handle: RePEc:hol:holodi:0502
    as

    Download full text from publisher

    File URL: http://www.rhul.ac.uk/economics/Research/WorkingPapers/pdf/dpe0502.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. is not listed on IDEAS
    2. He, Yan & Wu, Chunchi, 2004. "Price rounding and bid-ask spreads before and after the decimalization," International Review of Economics & Finance, Elsevier, vol. 13(1), pages 19-41.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hol:holodi:0502. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Claire Blackman The email address of this maintainer does not seem to be valid anymore. Please ask Claire Blackman to update the entry or send us the correct address (email available below). General contact details of provider: http://www.rhul.ac.uk/economics/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.