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Please use this identifier to cite or link to this item:
http://hdl.handle.net/10016/7112
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| Title: | Smiles, Bid-ask Spreads and Option pricing |
| Author(s): | Peña Sánchez de Rivera, Juan Ignacio [ypenya]
Rubio, Gonzalo
Serna, Gregorio |
| Publisher: | Wiley-Blackwell |
| Issued date: | 2001 |
| Citation: | European Financial Management, 2001, vol. 7, nº 3, p.351-374. |
| URI: | http://hdl.handle.net/10016/7112 |
| ISSN: | 1354-7798 (print)
1468-036X (online) |
| 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. |
| Review: | PeerReviewed |
| Keywords: | smiles
bid-ask spread
implied volatility function
option pricing |
| Rights: | ©Wiley-Blackwell |
| Appears in Collections: | DEE - Artículos de Revistas
Economists Online
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