This paper compares performances of bid-ask spread measures and analyzes bond-level characteristics' effects on the bid-ask spread for Turkish sovereign bonds traded in Borsa Istanbul. We use intraday order data to establish a relative quoted bid-ask spread as a benchmark and compare bid-ask...

Colocation services offered by stock exchanges enable market participants to achieve execution costs for large orders that are substantially lower and less sensitive to transacting against high-frequency traders. However, these benefits manifest only for orders executed on the colocated brokers'...

Market microstructure invariance (MMI) stipulates that trading costs of financial assets are driven by the volume and volatility of bets, that are, transactions intended to produce idiosyncratic gains based on investors’ beliefs. With futures transactions data, we estimate bet volume as the...

I introduce dynamic option trading and non-linear views into the classical portfolio selection problem. The optimal dynamic option portfolio is characterized explicitly in terms of its expected sensitivities (Greeks) and the role of the mean-variance effi cient portfolio is played by the "Greek...

Theory says an American call should never be exercised early, except possibly just before an ex-dividend date. But the best market bid is frequently below intrinsic value for an in-the-money short maturity option. An American option can always be exercised to recover intrinsic value, while...

Contracts for Difference (CFDs) represent a significant financial innovation in the design of futures contract. Their use in over-the-counter markets has grown significantly and has created controversy in the UK, but to date there have been no published academic studies examining CFD markets. In...

During the stock market turmoil and later on in the year 2008, the Securities and Exchange Commission of Pakistan (SECP) suspended trading in futures products at the Karachi Stock Exchange (KSE) due to their proven destabilizing role in Global Financial Crises (GFC). On July 27th 2009, the...

Recent research argues that uncertainty about future stock borrowing fees is an impediment to short-selling and it explains the risk-adjusted performance of short strategies. One possible mechanism is that borrowing fee risk carries a risk premium. Since the present value of the uncertain...

There is a close link between prices of equity options and the probability of default of a firm. We show that in the presence of positive expected equity recovery, the standard methods that assume zero equity recovery at default misestimate the probability of default implicit in option prices....