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Illiquidity transmission from spot to futures markets

Korn, Olaf; Krischak, Paolo; Theissen, Erik - Institut für Finanzmarktforschung, Wirtschafts- und … - 2014

We develop a model of the illiquidity transmission from spot to futures markets that formalizes the derivative hedge theory proposed by Cho and Engle (1999). The model shows that spot market illiquidity does not translate one-to-one to the futures market, but rather interacts with price risk,...

Persistent link: https://www.econbiz.de/10010957208

The information content of implied volatilities and model-free volatility expectations: Evidence from options written on individual stocks

Taylor, Stephen J.; Yadav, Pradeep K.; Zhang, Yuanyuan - Institut für Finanzmarktforschung, Wirtschafts- und … - 2009

The volatility information content of stock options for individual firms is measured using option prices for 149 U …, but the option forecasts are nearly always more informative for those firms that have the more actively traded options …. When the prediction horizon extends until the expiry date of the options, the option forecasts are more informative than …

Persistent link: https://www.econbiz.de/10008684983

Cross-sectional analysis of risk-neutral skewness

Taylor, Stephen J.; Yadav, Pradeep K.; Zhang, Yuanyuan - Institut für Finanzmarktforschung, Wirtschafts- und … - 2009

We investigate the association of various firm-specific and market-wide factors with the riskneutral skewness (RNS …) implied by the prices of individual stock options. Our analysis covers 149 U.S. firms over a four-year period. Our choice of … firms is based on adequate liquidity and trading interest across different strike prices in the options market, ensuring …

Persistent link: https://www.econbiz.de/10008683753

Portfolio optimization using forward-looking information

Kempf, Alexander; Korn, Olaf; Saßning, Sven - Institut für Finanzmarktforschung, Wirtschafts- und … - 2011

Persistent link: https://www.econbiz.de/10009323195

Trading the bond-CDS basis: The role of credit risk and liquidity

Trapp, Monika - Institut für Finanzmarktforschung, Wirtschafts- und … - 2009

We analyze trading opportunities that arise from differences between the bond and the CDS market. By simultaneously entering a position in a CDS contract and the underlying bond, traders can build a default-risk free position that allows them to repeatedly earn the difference between the bond...

Persistent link: https://www.econbiz.de/10008684965

The value of tradeability

Chesney, Marc; Kempf, Alexander - Institut für Finanzmarktforschung, Wirtschafts- und … - 2010

This paper determines the value of asset tradeability in an option pricing framework. In our model, tradeability is valuable since it allows investors to exploit temporary mis-pricings of stocks. The model delivers several novel insights on the value of tradeability: The value of tradeability is...

Persistent link: https://www.econbiz.de/10008684966

The term structure of illiquidity premia

Kempf, Alexander; Korn, Olaf; Uhrig-Homburg, Marliese - Institut für Finanzmarktforschung, Wirtschafts- und … - 2009

This paper investigates the dynamics of the term structure of bond market illiquidity premia using data on German bond market segments which differ only with respect to their liquidity. We analyze the interaction between different parts of the term structure and identify economic factors that...

Persistent link: https://www.econbiz.de/10008684970

Price discovery in spot and futures markets: A reconsideration

Theissen, Erik - Institut für Finanzmarktforschung, Wirtschafts- und … - 2009

We reconsider the issue of price discovery in spot and futures markets. We use a threshold error correction model to allow for arbitrage operations to have an impact on the return dynamics. We estimate the model using quote midpoints, and we modify the model to account for time-varying...

Persistent link: https://www.econbiz.de/10008684972

Price discovery in spot and futures markets: A reconsideration

Theissen, Erik - Institut für Finanzmarktforschung, Wirtschafts- und … - 2011

We reconsider the issue of price discovery in spot and futures markets. We use a threshold error correction model to allow for arbitrage opportunities to have an impact on the return dynamics. We estimate the model using quote midpoints, and we modify the model to account for time-varying...

Persistent link: https://www.econbiz.de/10010957187

Forward-looking measures of higher-order dependencies with an application to portfolio selection

Brinkmann, Felix; Kempf, Alexander; Korn, Olaf - Institut für Finanzmarktforschung, Wirtschafts- und … - 2014

-looking information from the options market and can be used to construct an implied estimator of the covariance, co-skewness, and co …

Persistent link: https://www.econbiz.de/10010957188