Liquidity and Arbitrage in Options Markets: A Survival Analysis Approach
Deville, Laurent; Riva, Fabrice (2007), Liquidity and Arbitrage in Options Markets: A Survival Analysis Approach, Review of Finance / European Finance Review, 11, 3, p. 497-525. 10.1093/rof/rfm021
Type
Article accepté pour publication ou publiéDate
2007Journal name
Review of Finance / European Finance ReviewVolume
11Number
3Pages
497-525
Publication identifier
Metadata
Show full item recordAuthor(s)
Deville, LaurentGroupe de Recherche en Droit, Economie et Gestion [GREDEG]
Riva, Fabrice
Dauphine Recherches en Management [DRM]
Abstract (EN)
This paper examines the determinants of the time it takes for an index options market toreturn to no arbitrage values after put-call parity deviations, using intraday transactions datafrom the French index options market. We employ survival analysis to characterize howlimits to arbitrage influence the expected duration of arbitrage deviations. After controllingfor conventional limits to arbitrage, we show that liquidity-linked variables are associatedwith a faster reversion of arbitrage profits. The introduction of an ETF also affects thesurvival rates of deviations but this impact essentially stems from the reduction in the levelof potential arbitrage profits.Subjects / Keywords
distribution; microstructure Derivatives; marketRelated items
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