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On the liquidity of CAC 40 index options market

Abstract : The current article shows that CAC 40 index options (namely PXA) display some illiquidity problems. We examine daily data on PXA trades between May 2005 and August 2012. The study evidences the presence of a considerable number of outstanding PXA contracts; most of these options are long-term maturity options and are deep in or deep out the money options. To overcome the highlighted liquidity issues, we propose first to test the generalization of Gray and Whaley reset option introduced by François-Heude and Yousfi. The main idea is to reset the strike price PXA option to a new strike price given by the CAC 40 value at a pre-agreed point of time. Then we provide some additional measures regarding the number of the PXA strike price series and the PXA expiration dates. Finally, we test them on PXA market. Results show a significant and positive effect on the PXA liquidity.
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Soumis le : mercredi 27 février 2019 - 13:46:58
Dernière modification le : jeudi 31 mars 2022 - 15:39:48

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Alain François-Heude, Ouidad yousfi. On the liquidity of CAC 40 index options market. Journal of derivatives & Hedge Funds, 2014, 20 (3), pp.177-198. ⟨10.1057/jdhf.2014.18⟩. ⟨hal-02050806⟩



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