Market Illiquidity and the Bid-Ask Spread of Derivatives
| Autor(a) principal: | |
|---|---|
| Data de Publicação: | 2000 |
| Outros Autores: | |
| Tipo de documento: | Artigo |
| Idioma: | eng |
| Título da fonte: | Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
| Texto Completo: | http://hdl.handle.net/10362/84957 |
Resumo: | This paper analyzes the impact of illiquidity of a stock on the pricing of derivatives. In particular, it is shown how illiquidity generates a bid-ask spread in an option on this stock, even in the absence of other imperfections, such as transaction costs and asymmetry of information. Moreover, the spread is shown to be asymmetric with respect to the option price under perfect liquidity. This fact explains the appearance of a smile effect when the implied volatility is estimated from the mid-quote. |
| id |
RCAP_6a2409c49ca699fb211d41683d4d1e60 |
|---|---|
| oai_identifier_str |
oai:run.unl.pt:10362/84957 |
| network_acronym_str |
RCAP |
| network_name_str |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
| repository_id_str |
7160 |
| spelling |
Market Illiquidity and the Bid-Ask Spread of DerivativesThis paper analyzes the impact of illiquidity of a stock on the pricing of derivatives. In particular, it is shown how illiquidity generates a bid-ask spread in an option on this stock, even in the absence of other imperfections, such as transaction costs and asymmetry of information. Moreover, the spread is shown to be asymmetric with respect to the option price under perfect liquidity. This fact explains the appearance of a smile effect when the implied volatility is estimated from the mid-quote.Nova SBERUNAmaro de Matos, JoãoAntão, Paula2019-10-21T13:02:04Z2000-03-272000-03-27T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttp://hdl.handle.net/10362/84957engAmaro de Matos, João and Antão, Paula, Market Illiquidity and the Bid-Ask Spread of Derivatives (March, 2000). FEUNL Working Paper Series No. 386info:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2024-03-11T04:37:51Zoai:run.unl.pt:10362/84957Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-20T03:36:33.008842Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse |
| dc.title.none.fl_str_mv |
Market Illiquidity and the Bid-Ask Spread of Derivatives |
| title |
Market Illiquidity and the Bid-Ask Spread of Derivatives |
| spellingShingle |
Market Illiquidity and the Bid-Ask Spread of Derivatives Amaro de Matos, João |
| title_short |
Market Illiquidity and the Bid-Ask Spread of Derivatives |
| title_full |
Market Illiquidity and the Bid-Ask Spread of Derivatives |
| title_fullStr |
Market Illiquidity and the Bid-Ask Spread of Derivatives |
| title_full_unstemmed |
Market Illiquidity and the Bid-Ask Spread of Derivatives |
| title_sort |
Market Illiquidity and the Bid-Ask Spread of Derivatives |
| author |
Amaro de Matos, João |
| author_facet |
Amaro de Matos, João Antão, Paula |
| author_role |
author |
| author2 |
Antão, Paula |
| author2_role |
author |
| dc.contributor.none.fl_str_mv |
RUN |
| dc.contributor.author.fl_str_mv |
Amaro de Matos, João Antão, Paula |
| description |
This paper analyzes the impact of illiquidity of a stock on the pricing of derivatives. In particular, it is shown how illiquidity generates a bid-ask spread in an option on this stock, even in the absence of other imperfections, such as transaction costs and asymmetry of information. Moreover, the spread is shown to be asymmetric with respect to the option price under perfect liquidity. This fact explains the appearance of a smile effect when the implied volatility is estimated from the mid-quote. |
| publishDate |
2000 |
| dc.date.none.fl_str_mv |
2000-03-27 2000-03-27T00:00:00Z 2019-10-21T13:02:04Z |
| dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
| dc.type.driver.fl_str_mv |
info:eu-repo/semantics/article |
| format |
article |
| status_str |
publishedVersion |
| dc.identifier.uri.fl_str_mv |
http://hdl.handle.net/10362/84957 |
| url |
http://hdl.handle.net/10362/84957 |
| dc.language.iso.fl_str_mv |
eng |
| language |
eng |
| dc.relation.none.fl_str_mv |
Amaro de Matos, João and Antão, Paula, Market Illiquidity and the Bid-Ask Spread of Derivatives (March, 2000). FEUNL Working Paper Series No. 386 |
| dc.rights.driver.fl_str_mv |
info:eu-repo/semantics/openAccess |
| eu_rights_str_mv |
openAccess |
| dc.format.none.fl_str_mv |
application/pdf |
| dc.publisher.none.fl_str_mv |
Nova SBE |
| publisher.none.fl_str_mv |
Nova SBE |
| dc.source.none.fl_str_mv |
reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação instacron:RCAAP |
| instname_str |
Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
| instacron_str |
RCAAP |
| institution |
RCAAP |
| reponame_str |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
| collection |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
| repository.name.fl_str_mv |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
| repository.mail.fl_str_mv |
|
| _version_ |
1799137983862931456 |