using transactions data. We propose a new market microstructure theory which we call derivative hedge theory, in which … volume as a measure of liquidity and supports the derivative hedge theory. Option market spreads are positively related to …

Given a European derivative security with an arbitrary payoff function and a corresponding set of" underlying … securities on which the derivative security is based, we solve the dynamic replication problem: find a" self-financing dynamic …-dependent options and options on assets with stochastic volatility and jumps. " …

particularly acute for markets where traders rely heavily on a specific empirical model such as in derivative markets. Asset … intermediary makes a market for a propriety derivative security. The market-maker chooses bid and ask prices for the derivative …

examines how the bid-ask spread and conditional volatility in the yen/dollar foreign exchange market changed around the time of … volatility, the deregulation was associated with a convergence of Japanese quoted spreads toward those of other banks. (2 …) Modeling the persistence in volatility reveals that deregulation lowered conditional volatility …

The paper studies the effect of the market's perceived exchange rate volatility on bid-ask spreads. The anticipated … volatility is extracted from currency options data. An increase in the perceived volatility is found to widen bid-ask spreads … estimate of the effect of the volatility on the spreads. Although the spread-volatility relation implied by the option model of …