Effective Bid-Ask Spreads in Futures versus Futures Options

Samarth Shah, B Brorsen and Kim B. Anderson

Journal of Agricultural and Resource Economics, 2012, vol. 37, issue 3, 14

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.

Keywords: Crop Production/Industries; Demand and Price Analysis; Research Methods/ Statistical Methods (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:jlaare:142355

DOI: 10.22004/ag.econ.142355

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