The Effect of Bid-Ask Prices on Brazilian Options Implied Volatility: A Case Study of Telemar Call Options

Although not explicitly reported, option traders on the Bovespa exchange pay an implicit bid-ask spread on each trade. Reported transaction prices that comprise the databases previously used to study the Brazilian options markets do not reflect actual option values at the time of the trades, but actual values plus (for purchases) or minus (for sales) the bid-ask spread. We use a chooser American option model to estimate Telemar call options bid-ask spreads, and to create a database of spread-adjusted trade prices. We find that the bid-ask spreads explain several previously reported puzzles regarding asset price volatility.

GMM and present value test of the C-CAPM under transactions costs: Evidence from the UK stock market

In this paper we test for the inclusion of the bid-ask spread in the consumption CAPM, in the UK stock market over the time period of 1980-2000. Two econometric models are used; first, Fisher’s (1994) asset pricing model is estimated by GMM, and secondly, the VAR approach proposed by Campbell and Shiller is extended to include the bid-ask spread. Overall the statistical tests are unable to reject the bid-ask spread as an independent explanatory variable in the C-CAPM. This leads to the conclusion that transactions costs should be included in asset pricing models

Bid-Ask Spreads, Volume, and Volatility: Evidence from Livestock Markets

Understanding the determinants of liquidity costs in agricultural futures markets is hampered by a need to use proxies for the bid-ask spread which are often biased, and by a failure to account for a jointly determined micro-market structure. We estimate liquidity costs and its determinants for the live cattle and hog futures markets using alternative liquidity cost estimators, intraday prices and micro-market information. Volume and volatility are simultaneously determined and significantly related to the bid-ask spread. Daily volume is negatively related to the spread while volatility and volume per transaction display positive relationships. Electronic trading has a significant competitive effect on liquidity costs, particularly in the live cattle market. Results are sensitive to the bid-ask spread measure, with a modified Bayesian method providing estimates most consistent with expectations and the competitive structure found in these markets.Bayesian estimation, bid-ask spread determinants, liquidity cost, Livestock Production/Industries, Marketing,

PENGARUH VOLUME PERDAGANGAN, FREKUENSI PERDAGANGAN, DAN VOLATILITAS HARGA SAHAM TERHADAP BID ASK SPREAD PADA PERUSAHAAN YANG MELAKUKAN STOCK SPLIT DI BURSA EFEK INDONESIA PERIODE 2010-2014

PUTRI YUNITA SARI. Influence Of Stock Trading Volume, Trading Frequency, And Stock Price Volatility Toward Bid Ask Spread On Companies That Doing Stock Split Activity In Indonesia Stock Exchange During Period 2010-2014. State University Of Jakarta. 2015 Advisors : (1) Rida Prihatni SE, Akt, M.Si; (2) Marsellisa Nindito SE, Akt, M.Sc CA The purpose of this study was to determine the effect of trading volume, trading frequency and volatility of stock price to bid ask spread. The sample used was a company that conducted a stock split 2010-2014. Data obtained sourced from Indonesia Stock Exchange is ICMD (Indonesian Capital Market Directory and yahoo finance. The sample used in this study were 35 companies using purposive sampling method. This analysis using multiple linear regression analysis. The results of this test showed that the partial variable trading volume, trading frequency and volatility of stock prices affect the bid ask spread. Based on the analysis found that the trading volume variable significant negative effect on the bid-ask spread. This shows that the higher the number of shares traded, then the value of the bid-ask the lower the spread. Variable frequency trading significant positive effect on the bid-ask spread. This shows that the higher frequency of trading a stock, then the value of the bid-ask spread will be even greater. Variable price volatility estimator significant positive effect on the bid-ask spread , This shows that the higher the risk of a stock resulting from stock price fluctuation proven will increase the value bid-ask spread and simultaneously indicate that all variables significantly influence the bid ask spread. Key Words: bid-ask spread, trading volume, trading frequency, price volatility estimato

The Equilibrium Dynamics for an Endogeneous Bid-Ask Spread in a Monopolistic financial Market

This paper presents an endogeneous model for the stochastic dynamics of the bid-ask spread of prices of nancial assets. The model is derived introducing an intermediary and inventory costs in the setting of equilibrium financial markets as described by Platen and Rebolledo (1996)Bid-ask spread; intermediary; dynamic equilibrium

Smiles, Bid-ask Spreads and Option pricing.

Given the evidence provided by Longstaff (1995), and Peña, Rubio and Serna (1999) a serious candidate to explain the pronounced pattern of volatility estimates across exercise prices might be related to liquidity costs. Using all calls and puts transacted between 16:00 and 16:45 on the Spanish IBEX‐35 index futures from January 1994 to October 1998 we extend previous papers to study the influence of liquidity costs, as proxied by the relative bid‐ask spread, on the pricing of options. Surprisingly, alternative parametric option pricing models incorporating the bid‐ask spread seem to perform poorly relative to Black‐Scholes.smiles; bid-ask spread; implied volatility function; option pricing;

PENGARUH INTERNAL CONTROL, VOLATILITAS SAHAM, DAN VOLUME PERDAGANGAN TERHADAP BID-ASK SPREAD PADA PERUSAHAAN YANG TERDAFTAR DALAM INDEKS LQ45 TAHUN 2011-2015

ABSTRACTThe purpose of this study is to examine the effect of internal control, stock volatility, and trading volume on bid-ask spread of companies listed in LQ45 index in the period of 2011 to 2015. Dependent variable used in this study is bid-ask spread, while independent variables used in this study are internal control, stock volatility, and trading volume. By using purposive sampling method, from 45 companies listed in LQ45 index, 16 companies are choosed as the sample in this study.The type of data used in this study is secondary data which are annual report and ICamel. Data is analyzed by statistical analysis using a multiple regression analysis. Then data is processed by statistical package for social science (SPSS) 20.The results of this study show that internal control, stock volatility, and trading volume have simultaneously effect on bid-ask spread. Internal control and stock volatility have significant positive on bid-ask spread, while trading volume have significant negative on bid-ask spread.Keywords : Internal Control, Stock Volatility, Trading Volume, Bid-Ask Spread.ABSTRAK Tujuan dari penelitian ini adalah untuk menguji pengaruh internal control, volatilitas saham, dan volume perdagangan terhadap bid-ask spread pada perusahaan yang terdaftar dalam indeks LQ45 tahun 2011-2015. Variabel dependen dalam penelitian ini adalah bid-ask spread, sedangkan variabel independen dalam penelitian ini adalah internal control, volatilitas saham, dan volume perdagangan. Penelitian ini menggunakan purposive sampling, dari 45 perusahaan yang terdaftar dalam indeks LQ45, 16 perusahaan terpilih menjadi sampel dalam penelitian ini.Jenis data yang digunakan dalam penelitian ini adalah data sekunder, yang diperoleh dari laporan tahunan dan ICamel. Data dianalisis menggunakan analisis statistik, yaitu analisis regresi linier berganda. Kemudian data diolah menggunakan statistical package for social science (SPSS) 20.Hasil penelitian ini menunjukkan bahwa internal control, volatilitas saham, dan volume perdagangan secara bersama-sama berpengaruh terhadap bid-ask spread. Internal control dan volatilitas saham mempunyai pengaruh positif signifikan terhadap bid-ask spread, sedangkan volume perdagangan mempunyai pengaruh negatif signifikan terhadap bid-ask spread.Kata kunci : Internal Control, Volatilitas Saham, Volume Perdagangan, Bid-Ask Spread

Modelling the Intraday Return Volatility Process In The Australian Equity Market: An Examination Of The Role Of Information Arrival In S&P/Asx 50 Stocks

This paper examines the intraday return volatility process in Australian company stocks. The data set employed consists of five-minute returns, trading volumes and bid-ask spreads over the period 31 December 2002 to 4 March 2003 for the fifty national and multinational stocks comprising the S&P/ASX 50 index. GARCH is used to model the time-varying variance in the intraday return series and the inclusion of news arrival as proxied by the contemporaneous and lagged volume of trade and bid-ask spread is used as an exogenous explanatory variable. The results indicate strong persistence in volatility for the fifty stocks even with the contemporaneous and lagged volume of trade and bid-ask spread included as explanatory variables in the models. Overall, while there is much variation among the stocks included in terms of the role of the irregular arrival of new information in generating GARCH effects and the degree of persistence, all of the volatility processes are mean reverting.return volatility; trading volume; bid-ask spread; GARCH