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Option‐Expiration Effects in Small Markets: The Spanish Stock Exchange
Author(s) -
Corredor P.,
Lechón P.,
Santamaría R.
Publication year - 2001
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.2002
Subject(s) - expiration , volatility (finance) , economics , futures contract , financial economics , expiration date , stock (firearms) , stock exchange , monetary economics , business , econometrics , finance , medicine , respiratory system , mechanical engineering , chemistry , food science , engineering
This study analyzes the effect of the expiration of the Ibex‐35 Index derivatives, as well as thefirst four stock options traded in the Spanish Equity Derivatives Exchange, on the return, conditionalvolatility, and trading volume of the underlying assets. The analysis covers the period from the introduction ofthe various derivatives to December 1995. This period has been divided into two subperiods in order to determineif there are changes in the conclusions. The expiration of the Ibex‐35 index derivatives is associatedwith an increase in the trading volume of the underlying asset, but it has no significant effect on either theunderlying asset prices or on the level of volatility on the expiration day. However, the expiration of thestock options has significant impact on their underlying assets. We observed a downward pressure on prices and areduction of volatility level in the week before the expiration date and a significant increase in tradingvolume on the expiration day. The absence of futures contracts on individual stocks, among other possiblecauses, may explain these differences. © 2001 John Wiley & Sons, Inc. Jrl Fut Mark 21:905–928,2001