Competition Without Fungibility: Evidence from Alternative Market Structures for Derivatives

@article{Bartram2010CompetitionWF,
  title={Competition Without Fungibility: Evidence from Alternative Market Structures for Derivatives},
  author={S{\"o}hnke M. Bartram and Frank Fehle},
  journal={Financial Accounting},
  year={2010}
}
In this paper, we compare option contracts from a traditional derivatives exchange to bank-issued options, also referred to as covered warrants. While bank-issued option markets and traditional derivatives exchanges exhibit significant structural differences such as the absence of a central counterparty for bank-issued options, they frequently exist side-by-side, and the empirical evidence shows that there is significant overlap in their product offerings although options are not fungible… Expand
Analysing bank-issued option pricing
This paper investigates whether Spanish bank-issued options (warrants) trade under a fair price. The analysis is twofold. Price differences between traditional options and equivalent bank-issuedExpand
Investors with Too Many Options?
During the last decade, markets for covered warrants (bank-issued options) have flourished in Europe and Asia. In these markets, investors often face a choice between many instruments that differExpand
Pricing of put warrants and competition among issuers
Issuers may compete with each other by issuing similar warrants with the same underlying stocks, causing a supply-side effect on warrant markets. The study provides a theory and supported evidenceExpand
Direct and Indirect Competition Among Structured Financial Products: The Case of Discount Certificates in Germany
This article investigates effects of direct and indirect product competition on overpricing of discount certificates in Germany. The results indicate that whereas indirect competition reducesExpand
The Dynamics of Overpricing in Structured Products
Issuers of structured products have great power when setting the price of their securities. Each issuer is the sole liquidity provider in the secondary market for her products, and short-selling isExpand
Volatility discovery and volatility quoting on markets for options and warrants
In several countries, classical options markets coexist with markets for bank-issued options, also termed warrants. It is an open question if warrant issuers purely adopt options market informationExpand
Volatility Discovery and Volatility Quoting on Markets for Options and Warrants
In several countries, classical options markets coexist with markets for bank-issued options, also termed warrants. It is an open question if warrant issuers purely adopt options market informationExpand
Competition and Innovation in Option-Market Models
The equity options market has shown rapid growth and the competition among different options exchanges and trading platforms has intensified in recent years. As growth and competition in the U.S.Expand
Covered Warrant Valuation: A Costly Hedging Model
We provide a new, supply-side explanation for the consistent, statistically significant, empirical observation that covered warrant prices are higher than those of corresponding traded options.Expand
Does Adverse Selection Affect Bid-Ask Spreads for Options‘
This study examines two different option markets to test whether differences in the level of adverse selection faced by market makers affect the size of bid–ask spreads. The data are from bank‐issuedExpand
...
1
2
3
4
...

References

SHOWING 1-10 OF 15 REFERENCES
Competition, Market Structure, and Bid‐Ask Spreads in Stock Option Markets
This paper examines the effects of competition and market structure on equity option bid-ask spreads from 1986 to 1997. Options listed on multiple exchanges have narrower spreads than those listed onExpand
The Value of Liquidity: Evidence from the Derivatives Market
Abstract This paper documents the systematic overpricing of warrants relative to options. Models are developed in order to explain the cross-sectional variation in the relative pricing of theseExpand
The Behavior of Bid-Ask Spreads and Volume in Options Markets During the Competition for Listings in 1999
In August 1999, U.S. exchanges began to compete directly for order flow in many options that had been exclusively listed on another exchange, shifting 37% of option volume to multiple-listing statusExpand
Behavioral Preferences for Individual Securities: The Case for Call Warrants and Call Options
Since 1998, large investment banks have flooded the European capital markets with issues of call warrants.This has led to a unique situation in the Netherlands, where now call warrants, traded on theExpand
4 While issuing banks continuously quote bid and ask prices, the bid quotes are conditional on the investor having previously purchased the option
  • Journal of Banking & Finance
  • 2006
Does a national market system exist for U.S. exchange-listed equity options
  • Journal of Finance
  • 2004
Covered Warrants, First Edition
  • 2002
Covered Warrants, First Edition, London: Harriman House
  • 2002
EuRex market making
  • EuRex Communications
  • 2002
EuWax -das Marksegment für verbriefte Derivate
  • EuWax
  • 2002
...
1
2
...