Publication Type
Journal Article
Version
acceptedVersion
Publication Date
7-2003
Abstract
The paper ascertains the relation between bid-ask spreads and the contract maturity of OTC currency options. Contrary to previous findings in the futures market, spreads of currency options are found to be negatively related to the contract's term-to-maturity. The negative relation persists even after controlling for the effects of price risks, competition, and trading activity. The pronounced differences in the term-to-maturity results are attributable to the market risk effect and differences in the market structure of options and futures markets.
Keywords
maturity effect, bid-ask spread, OTC, currency options, term-to-maturitymaturity effect, bid-ask spread, OTC, currency options, term-to-maturity
Discipline
Business | Finance and Financial Management
Research Areas
Finance
Publication
Review of Quantitative Finance and Accounting
Volume
21
Issue
1
First Page
5
Last Page
15
ISSN
0924-865X
Identifier
10.1023/a:1024883004298
Publisher
Springer
Citation
CHONG, Beng Soon; DING, David K.; and TAN, Kok Hui.
Maturity Effect on Bid-Ask Spreads of OTC Currency Options. (2003). Review of Quantitative Finance and Accounting. 21, (1), 5-15.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/1160
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1023/a:1024883004298