Illiquidity and Higher Cumulants

• 成果类型: Article
• 署名作者: Glebkin, Sergei; Malamud, Semyon; Teguia, Alberto
• 署名单位: INSEAD Business School; Swiss Federal Institutes of Technology Domain; Ecole Polytechnique Federale de Lausanne; Swiss Finance Institute (SFI); University of British Columbia
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhac069
• 发表日期: 2023
• 页码: 2131
• 关键词: rational-expectations equilibrium; market liquidity; asset prices; INFORMATION; demand; MODEL; transactions; constraints; asymmetry; COSTS

摘要

We characterize the unique equilibrium in an economy populated by strategic CARA investors who trade multiple risky assets with arbitrarily distributed payoffs. We use our explicit solution to study the joint behavior of illiquidity of option contracts. Option bid-ask spreads are proportional to risk aversion and risk-neutral variances of option payoffs. Spreads may decrease in risk aversion, physical variance, open interest, and increase after earnings announcements in a result contrary to conventional wisdom. All these predictions are confirmed empirically using a large panel data set of U.S. stock options.