Clustering of Trading Activity in the DAX Index Options Market

Alexander Koch and Zdravetz Lazarov

No 30/2001, Bonn Econ Discussion Papers from University of Bonn, Bonn Graduate School of Economics (BGSE)

Abstract: Trades in DAX index options with identical maturities cluster around particular classes of strike prices. For example, options with strikes ending on 50 are less traded than options with strikes ending on 00. Clustering is higher when options with close strike prices are good substitutes. The degree of substitution between options with neighboring strikes depends on the strike price grid and options' characteristics. Using regression analysis we analyze the relation between clustering, grid size, and the options' characteristics. To our knowledge this paper is the first to explore how the grid size of strike prices affects options' trading volume.

Keywords: Clustering; Incidental Truncation; Index Options; Volume (search for similar items in EconPapers)
JEL-codes: C24 G10 (search for similar items in EconPapers)
Date: 2001
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Clustering of Trading Activity in the DAX Index Options Market (2005)
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