Smiles, Bid-ask Spreads and Option pricing

Peña, Juan Ignacio; Rubio, Gonzalo; Serna, Gregorio

Publication:
Smiles, Bid-ask Spreads and Option pricing

dc.affiliation.dpto	UC3M. Departamento de Economía de la Empresa	es
dc.contributor.author	Peña, Juan Ignacio
dc.contributor.author	Rubio, Gonzalo
dc.contributor.author	Serna, Gregorio
dc.date.accessioned	2010-03-03T12:11:11Z
dc.date.available	2010-03-03T12:11:11Z
dc.date.issued	2001
dc.description.abstract	Given the evidence provided by Longstaff (1995), and Peña, Rubio and Serna (1999) a serious candidate to explain the pronounced pattern of volatility estimates across exercise prices might be related to liquidity costs. Using all calls and puts transacted between 16:00 and 16:45 on the Spanish IBEX‐35 index futures from January 1994 to October 1998 we extend previous papers to study the influence of liquidity costs, as proxied by the relative bid‐ask spread, on the pricing of options. Surprisingly, alternative parametric option pricing models incorporating the bid‐ask spread seem to perform poorly relative to Black‐Scholes.
dc.description.status	Publicado
dc.format.mimetype	application/pdf
dc.identifier.bibliographicCitation	European Financial Management, 2001, vol. 7, nº 3, p.351-374.
dc.identifier.issn	1354-7798 (print)
dc.identifier.issn	1468-036X (online)
dc.identifier.publicationfirstpage	351
dc.identifier.publicationissue	3
dc.identifier.publicationtitle	European Financial Management
dc.identifier.publicationvolume	7
dc.identifier.uri	https://hdl.handle.net/10016/7112
dc.language.iso	eng
dc.publisher	Wiley-Blackwell
dc.rights	©Wiley-Blackwell
dc.rights.accessRights	open access
dc.rights.uri	http://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.subject.eciencia	Empresa
dc.subject.other	smiles
dc.subject.other	bid-ask spread
dc.subject.other	implied volatility function
dc.subject.other	option pricing
dc.title	Smiles, Bid-ask Spreads and Option pricing
dc.type	research article	*
dc.type.review	PeerReviewed
dspace.entity.type	Publication