Koch, A K and Lazarov, Z (2005) Clustering of Trading Activity in the DAX Index Options Market.
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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 then aoptions 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This is a Submitted version This version's date is: 27/2/2005 This item is not peer reviewed
https://repository.royalholloway.ac.uk/items/ea6fbc57-3ce2-a181-d4c0-e0a1ae0a8f7e/5/
Deposited by Research Information System (atira) on 03-Jul-2014 in Royal Holloway Research Online.Last modified on 03-Jul-2014