A la Recherche du Temps Perdu: Legal and Quantitative analysis of the First Documented Option Market - Paris 1844-1939

Antoine Parent and Pierre-Charles Pradier

SciencePo Working papers Main from HAL

Abstract: We provide the first ever quantitative analysis of pricing and profitability of option trading in Paris from 1843 to 1939 based on a data source featuring more than 75,000 option prices. Using a special case of the Black (1976) option pricing model, we show that, albeit options were consistently undervalued, the market was still profitable for all the parties. We prove that the exceptional longevity of the Paris options market was based on a 4-pillars market microstructure: (1.) systematic underpricing of cheap options to attract gamblers, (2.) administration of settlement price by the brokers' syndicate, (3.) parimutuel-like betting operation and safety thanks to (4.) a sophisticated risk management in the position-taking style which minimized actual clearing price manipulation.

Keywords: Option pricing; financial risk management; betting markets; alternative investments (search for similar items in EconPapers)
Date: 2022-10
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-03815575v1
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in 2022

Downloads: (external link)
https://shs.hal.science/halshs-03815575v1/document (application/pdf)

Related works:
Working Paper: A la Recherche du Temps Perdu: Legal and Quantitative analysis of the First Documented Option Market - Paris 1844-1939 (2022)
Working Paper: A la Recherche du Temps Perdu: Legal and Quantitative analysis of the First Documented Option Market - Paris 1844-1939 (2022)
Working Paper: A la Recherche du Temps Perdu: Legal and Quantitative Analysis of the First Documented Option Market - Paris 1844-1939 (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:spmain:halshs-03815575

Access Statistics for this paper

More papers in SciencePo Working papers Main from HAL
Bibliographic data for series maintained by Contact - Sciences Po Departement of Economics ().