Alexander Koch and Zdravetz Lazarov (2005) Clustering of Trading Activity in the DAX Index Options Mar.
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A common contention is that more liquid financial contracts draw trading volume from contracts for which they are close substitutes. This paper tests this hypothesis by analyzing clustering of trading activity in DAX index options. Contracts with identical maturities cluster around particular classes of strike prices. For example, options with strikes ending on 50 are less traded than options with strikes ending on 00. The degree of substitution between options with neighboring strikes depends on the strike price grid and options’ characteristics. Our empirical analysis finds a positive relation between clustering and substitutiability between option contracts, providing support to the initial hypothesis.
This is a Accepted version This version's date is: 2005 This item is not peer reviewed
https://repository.royalholloway.ac.uk/items/a598c2e7-200a-f19b-2963-594ff543dc69/1/
Deposited by Leanne Workman (UXYL007) on 12-Oct-2012 in Royal Holloway Research Online.Last modified on 12-Oct-2012
©2005 Alexander K. Koch and Zdravetz Lazarov. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit including © notice, is given to the source.