This is an introduction to a five-volume collection of papers on financial econometrics to be published by Edward Elgar Publishers in 2007. Financial econometrics is one of the fastest growing branches of economics today, both in academia and in industry. The increasing sophistication of...

In line with the transactions cost theory, this paper shows that the futures market with its higher liquidity and lower transactions costs, leads the options market in the price discovery process. Liquidity and transaction costs are also shown to play a key role in market sensitivity to...

We develop a simple model of the effect of transaction reporting on trade execution costs and test it using a sample of institutional trades in corporate bonds, before and after the initiation of public transaction reporting through the TRACE system. The results indicate a reduction of...

This study presents a model for estimating the asymmetry of option values with respect to option bid-ask spreads. The model does not require knowledge of the actual option value to evaluate the asymmetry. Using data from the Swedish equity options market, several interesting results emerge....

Why do we see so much options trading in the period around dividend ex-dates? We examine option open interest and volume around ex-dates for fifty of the most actively optioned stocks whose options traded on CBOE for each of the three years 1986-1988 to find a partial answer to the question. We...

This paper examines the convexity bias introduced by pricing interest rate swaps off the Eurocurrency futures curve and the market's adjustment of this bias in prices over time. Theconvexity bias arises because of the difference between a futures versus a forward contract on interest rates,...

As expiration dates for Nifty stock index futures approach, trading volume in calendar spreads rises at times to over 50% of total daily volume, making this transaction particularly important to execute efficiently for investors rolling over sizable positions into deferred month contracts. In...

This paper studies the trading behavior of different types of traders in commodity futures and their impact on liquidity consumption/provision as well as price discovery in the market. CME classifies each trade by its Customer Type Indicator (CTI) into four groups: a local trader who trades for...

We show that log-dividends (d) and log-prices (p) are cointegrated, but, instead of de facto assuming the stationarity of the classical log dividend–price ratio, we allow the data to reveal the cointegration vector between d and p. We define the modified dividend–price ratio (mdp), as the...

We estimate post-jump volatility-decay risk premia as the predictable ‎difference between periods of high and low diffusive volatility. By ‎constructing straddle portfolios after positive and negative jumps occur, we ‎show that the gains that these hedged options' portfolios yield...