Commonality in liquidity across options and stock futures markets

Benzennou, Bouchra; ap Gwilym, Owain; Williams, Gwion

Abstract

This study investigates the existence of common factors driving liquidity across different markets during a crisis period. The evidence suggests that liquidity across different European options and stock futures markets co-moves. This implies the existence of limits to the potential for liquidity risk management via options and stock futures because both markets experience simultaneous liquidity shocks. These findings are relevant to investors when timing their hedging, speculation, or arbitrage strategies.

Citation

Benzennou, B., ap Gwilym, O., & Williams, G. (2020). Commonality in liquidity across options and stock futures markets. Finance Research Letters, 32, Article 101096. https://doi.org/10.1016/j.frl.2019.01.008

• Journal Article Type: Article
• Acceptance Date: Sep 10, 2018
• Online Publication Date: Jan 28, 2019
• Publication Date: Jan 1, 2020
• Deposit Date: May 25, 2021
• Publicly Available Date: May 27, 2021
• Journal: Finance Research Letters
• Print ISSN: 1544-6123
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 32
• Article Number: 101096
• DOI: https://doi.org/10.1016/j.frl.2019.01.008
• Keywords: Liquidity commonality, Options, Stock futures
• Public URL: https://uwe-repository.worktribe.com/output/6015927
• Related Public URLs: https://research.bangor.ac.uk/portal/files/22522175/2019_Commonality.pdf