Published:
01/15/2004
Attachments:
Working Paper 04-2
Author(s): Michelle A. Danis, Financial Economist
Abstract: This paper develops a joint model of exchange entry and the bid-ask spread in equity option markets. To our knowledge, no other study of spreads in financial markets has incorporated the exchange decision about whether or not to list a security. This allows us to control for the potential endogeneity of the exchanges in a manner consistent with a game theoretic model of entry.