Maturity Effect on Bid-Ask Spreads of Otc Currency Options

Author

B.S. Chong
David K. DING, Singapore Management UniversityFollow
K.H. Tan

Publication Type

Conference Paper

Publication Date

5-2002

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.

Discipline

Business

Publication

9th Global Finance Conference

Volume

21

First Page

5-15

ISSN

0924-865X

Identifier

10.1023/A:1024883004298

Citation

Chong, B.S.; DING, David K.; and Tan, K.H.. Maturity Effect on Bid-Ask Spreads of Otc Currency Options. (2002). 9th Global Finance Conference. 21, 5-15.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/741