Arbitrage opportunities, liquidity provision, and trader types in an index option market

• Published in: The journal of futures markets Vol. 40; no. 3; pp. 279 - 307
• Main Authors: Chen, Chin‐Ho, Chiu, Junmao, Chung, Huimin
• Format: Journal Article
• Language: English
• Published: Hoboken Wiley Periodicals Inc 01.03.2020
• Subjects: Arbitrage; Exploitation; Liquidity; liquidity provision; put–call futures parity; Transactions; Violations

This study examines the impact of arbitrage in put–call futures parity (PCFP) violations on option market liquidity and explores the liquidity provision process by trader type during periods of arbitrage exploitation. Using a unique data set comprising the complete history of transactions, we find t...