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From funding liquidity to market liquidity: Evidence from the index options market

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journal contribution
posted on 06.07.2020 by Cheng Zhang, Chunbo Liu, Zhiping Zhou
This study examines the relationship between funding liquidity and market liquidity using daily data on the S&P 500 index options. We find that options market liquidity is positively correlated with funding liquidity after controlling for market uncertainty. Further analysis reveals that the positive relationship between funding liquidity and market liquidity in the options market is mainly driven by short‐term and deep out‐of‐the‐money options. Our results remain robust after controlling for the confounding effects of the equity market and different data frequencies.

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Preferred citation

(2018). From funding liquidity to market liquidity: Evidence from the index options market. Journal of Futures Markets. https://doi.org/10.1002/fut.21920

Journal title

Journal of Futures Markets

Publication date

04/05/2018

Publisher

Wiley-Blackwell

Publication status

Published

Contribution type

Article

Online publication date

04/05/2018

ISSN

0270-7314

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