Quote inefficiency in options markets |
| |
| Affiliation: | 1. School of Business and Economics, UiT-The Artic University of Norway and Stockholm Business School, Stockholm University, Sweden;2. Department of Business Administration, Universidad Carlos III de Madrid, 28093 (Getafe) Madrid, Spain;1. Finance Center Muenster, University of Muenster, Universitätsstr. 14-16, 48143 Münster, Germany;2. UBS AG, Group Risk Methodology, 8098 Zürich, Switzerland;1. Department of Economics, University of Peloponnese, Greece;2. Department of Accounting and Finance, Athens University of Economics and Business, Greece;3. EDHEC Business School and EDHEC Risk Institute, France;1. Terry College of Business, University of Georgia, Athens, GA 30602, USA;2. Haub School of Business, Saint Joseph’s University, Philadelphia, PA 19131, USA |
| |
| Abstract: | In an arbitrage-free economy with non-zero bid-ask spreads the existence of payoffs whose price is lower than the price of a dominated payoff cannot be discarded in general. However, when the former price corresponds to trivial portfolios which involve buying or selling one unit of the basis assets, its presence, although not an arbitrage, is a severe market anomaly which we refer to as an inefficient quote. In an empirical study, we report evidence that indicates that in options markets both the frequency and the magnitude of these anomalies are substantial and we document puzzling patterns in their behavior. |
| |
| Keywords: | Inefficient quotes Bid-ask spread Law of one price Index options |
| 本文献已被 ScienceDirect 等数据库收录！ |
|
