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On the liquidity of CAC 40 index options Market

  • François-Heude, Alain
  • Yousfi, Ouidad
Registered author(s):

    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.

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    File URL: https://mpra.ub.uni-muenchen.de/47921/8/MPRA_paper_47921.pdf
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    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 47921.

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    Date of creation: 30 Jun 2013
    Date of revision: 01 Jul 2013
    Handle: RePEc:pra:mprapa:47921
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    1. François-Heude, Alain & Yousfi, Ouidad, 2013. "A Generalization of Gray and Whaley's Option," MPRA Paper 47908, University Library of Munich, Germany, revised 30 Jun 2013.
    2. Engle, Robert F, 1999. "Modeling the Impacts of Market Activity on Bid-Ask Spreads in the Option Market," University of California at San Diego, Economics Working Paper Series qt6rp7g17q, Department of Economics, UC San Diego.
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    7. Amihud, Yakov & Mendelson, Haim & Pedersen, Lasse Heje, 2006. "Liquidity and Asset Prices," Foundations and Trends(R) in Finance, now publishers, vol. 1(4), pages 269-364, February.
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    19. Liu, Weimin, 2006. "A liquidity-augmented capital asset pricing model," Journal of Financial Economics, Elsevier, vol. 82(3), pages 631-671, December.
    20. Kamara, Avraham & Miller, Thomas W., 1995. "Daily and Intradaily Tests of European Put-Call Parity," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 30(04), pages 519-539, December.
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    23. RØdiger Frey, 1998. "Perfect option hedging for a large trader," Finance and Stochastics, Springer, vol. 2(2), pages 115-141.
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    25. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June.
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