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An Approach to the Option Market Model Based on End‐User Net Demand

Hiroshi Sasaki

Journal of Futures Markets, 2015, vol. 35, issue 5, 476-503

Abstract: In this paper, we study financial option prices and their related topics in terms of demand‐pressure effects of options contracts. Deriving equilibrium demand pressures for options, we provide an explicit representation of the pricing kernel in equilibrium between the supply and demand for options, which is a function of those of equilibrium demand pressures. On the basis of the demand‐based pricing kernel in equilibrium derived from our model setup, we provide some important implications for empirical evidence that have been provided in recent studies related to option pricing anomalies. © 2014 Wiley Periodicals, Inc. Jrl Fut Mark 35:476–503, 2015

Date: 2015
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