On the Liquidity of CAC 40 Index Options Market

François Heude, Alain; Yousfi, Ouidad

doi:10.2139/ssrn.2288660

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On the Liquidity of CAC 40 Index Options Market

27 Pages Posted: 3 Jul 2013

See all articles by Alain François Heude

Alain François Heude

Université Montpellier II - Montpellier Research in Management (MRM)

Ouidad Yousfi

Université de Montpellier

Date Written: June 30, 2013

Abstract

Daily data available between May 2005 and August 2012 show the presence of a considerable number of outstanding PXA contracts that have not expired and been offset by taking or making delivery. The current paper concludes that CAC 40 index options displays some illiquidity problems, particularly long term maturity options that are deep out or in the money.

To enhance liquidity, we test the generalized reset GR option of François-Heude and Yousfi (2013) in the PXA options' market.

Our preliminary results show a significant and positive effect on the liquidity of PXA options in several ways.

Keywords: Strike reset, option, PXA, liquidity, reset option

JEL Classification: G12, G13

Suggested Citation: Suggested Citation

François Heude, Alain and Yousfi, Ouidad, On the Liquidity of CAC 40 Index Options Market (June 30, 2013). Available at SSRN: https://ssrn.com/abstract=2288660 or http://dx.doi.org/10.2139/ssrn.2288660