The Determinants of the Time to Efficiency in Options Markets : A Survival Analysis Approach
Riva, Fabrice; Deville, Laurent (2005), The Determinants of the Time to Efficiency in Options Markets : A Survival Analysis Approach, 4ème journées d'économétrie de Nanterre : "Développements récents de l'économétrie appliquée à la finance", 2005-12, Nanterre, France
TypeCommunication / Conférence
Conference title4ème journées d'économétrie de Nanterre : "Développements récents de l'économétrie appliquée à la finance"
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Abstract (EN)This paper examines the determinants of the time it takes for an index options market to be brought back to efficiency after put-call parity deviations, using intraday transactions data from the French CAC 40 index options over the August 2000 - July 2001 period. We address this issue through survival analysis which allows us to characterize how differences in market conditions influence the expected time before the market reaches the no-arbitrage relationship. We find that moneyness, maturity, trading volume as well as trade imbalances in call and put options, and volatility are important in understanding why some arbitrage opportunities disappear faster than others. After controlling for differences in the trading environnement, we find evidence of a negative relationship between the existence of ETFs on the index and the time to efficiency.
Subjects / KeywordsExchange traded funds; Survival Analysis; Market efficiency; Index options
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