Competition without fungibility: evidence from alternative market structures for derivatives

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 between the two markets. The empirical analysis indicates that bid-ask spreads in either market are lowered by 1–2% due to competition from the other market, providing evidence that the benefits of competing market structures are available in the absence of fungibility

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-issued options that trade on EuWax, where market makers face little adverse selection and traditional options that trade on EuRex. The results support the hypothesis that the adverse selection component of the bid–ask spread is important, as options on EuWax have lower bid–ask spreads than comparable options on EuRex. The results show that the adverse selection component represents at least half of the overall bid–ask spreads on the traditional EuRex

Investigation of local heat transfer in compact heat exchangers by holographic interferometry

Compact heat exchangers are key components for the development of future aircraft devices. An enhancement of the heat transfer rate results in a decrease of the heat exchanger size and thus in lower weight and lower investment costs. The exact knowledge of the temperature distribution in the boundary layer is necessary for a specific augmentation of heat transfer. Holographic interferometry was applied to visualize the temperature field. This optical measuring method offers the advantage to deliver information about the temperature distribution without disturbing the flow pattern. A digital image processing system was used for the evaluation of the interferograms. The local Nusselt number was determined from the isotherms at the wall. Two different types of geometries for compact plate heat exchangers were investigated using air as test fluid: Plain fin arrangements of plate-fin heat exchangers and circular segment shaped turbulence promoters in plate heat exchangers. The test section was heated by hot water in order to obtain a constant wall temperature as thermal boundary condition. During the experiments the Reynolds number was varied between 500 and 3000, a range where low pressure losses occurred. The investigations of the plate-fin arrangements show that the Nusselt number for the geometry with 1 mm radii is about 15% higher than that for the duct with radii of 5 mm. In the case of the circular segment shaped turbulence promoters a staggered, a non-staggered and an inclined arrangement were investigated. The overall Nusselt number shows that the non-staggered ribs lead to the best heat transfer. To compare the results with the heat transfer in a flat duct the Nusselt number distribution between parallel plates was calculated by equations taken from the literature. The present results show that an enhancement of heat transfer of 100% for low Reynolds numbers and of approximately 300% for Reynolds number of 2500 can be achieved. (orig.)SIGLEAvailable from TIB Hannover: D.Dt.F.QN1(18,13) / FIZ - Fachinformationszzentrum Karlsruhe / TIB - Technische InformationsbibliothekBundesministerium fuer Forschung und Technologie (BMFT), Bonn (Germany)DEGerman

Bid ask spread in a competitive market with institutions and order size

Information asymmetry, Sequential equilibrium, Order size, Security price, Bid-ask spread, Institutions, G10, G14,