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- Title
Effective Bid-Ask Spreads in Futures versus Futures Options.
- Authors
Shah, Samarth; Brorsen, B. Wade; Anderson, Kim B.
- Abstract
While considerable research has estimated liquidity costs of futures trading, little comparable research is available about options markets. This study determines effective bid-ask spreads in options and futures markets for Kansas City Board of Trade (KCBT) wheat. Effective bid-ask spreads are estimates of the actual liquidity cost of a round-trip order. Option liquidity costs are estimated using a new measure of effective spreads developed for options markets. Futures effective spreads are estimated using eight different measures developed in previous studies. Estimated effective bid-ask spreads of options contracts are at least double the effective bid-ask spreads of open-outcry futures contracts.
- Subjects
KANSAS City (Mo.); MISSOURI; ASKED price; COST estimates; BOARD of Trade of Kansas City, Mo.; WHEAT; MICROSTRUCTURE; FUTURES market
- Publication
Journal of Agricultural & Resource Economics, 2012, Vol 37, Issue 3, p455
- ISSN
1068-5502
- Publication type
Article