Given the growth of the inverse ETF markets, exchanges have begun to trade options on inverse ETFs, similar to the trading of options on regular ETFs. Since both regular and inverse ETFs on the same index trade the same underlying risk, the pricing of options on regular ETFs and the pricing of...

The purpose of this paper is to examine the effect of illiquidity on the value of currency options. We use a unique dataset that allows us to explore this issue in special circumstances where options are issued by a central bank and are not traded prior to maturity. The value of these options is...