On the Liquidity of CAC 40 Index Options Market

descriptionPublicationkeyboard_double_arrow_right Article , Other literature type , Preprint 01 Jan 2013 English Publisher:Elsevier BVJournal:SSRN Electronic Journal (eissn: 1556-5068,

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Authors: Alain François-Heude; Ouidad Yous;

doi: 10.2139/ssrn.2288660 , 10.1057/jdhf.2014.18

On the Liquidity of CAC 40 Index Options Market

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Abstract

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 Francois-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.

Related Organizations

University of Montpellier
France
University of Montpellier
France

Keywords

strike reset, option, PXA, liquidity, reset option., jel: jel:G12, jel: jel:G13

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