This study examines option market liquidity using Ivy DB's OptionMetrics data. We establish convincing evidence of commonality for various liquidity measures based on the bid-ask spread, volumes, and price impact. The commonality remains strong even after controlling for the underlying stock...

We find that liquidity is priced in corporate yield spreads. Using a battery of liquidity measures covering over 4,000 corporate bonds and spanning both investment grade and speculative categories, we find that more illiquid bonds earn higher yield spreads, and an improvement in liquidity causes...

This paper investigates the motive of option trading. We show that option trading is mostly driven by differences of opinion, a finding different from the current literature that attempts to attribute option trading to information asymmetry. Our conclusion is based on three pieces of empirical...

We empirically examine the impact of trading activities on the liquidity of individual equity options measured by the proportional bid-ask spread. There are three main findings. First, the option return volatility, defined as the option price elasticity times the stock return volatility, has a...

This study analyzes the valuation of housing index derivatives traded on the Chicago Mercantile Exchange (CME). Specifically, to circumvent the nontradability of housing indices, we propose and implement an equilibrium valuation framework. Assuming a mean‐reverting aggregate dividend process...

In the current literature, the focus of credit‐risk analysis has been either on the valuation of risky corporate bond and credit spread or on the valuation of vulnerable options, but never both in the same context. There are two main concerns with existing studies. First, corporate bonds and...