Options decimalization / by Faith Chin and Corey Garriott.: FB3-5/2016-57E-PDF
We document the outcome of an options decimalization pilot on Canada’s derivatives exchange. Decimalization improves measures of liquidity and price efficiency. The impact differs by the moneyness of an option and is greatest for out-of-the-money options. In contrast with equity studies, decimalization improved depth near the best prices and improved liquidity for larger trades. We conclude with advice on decimalizing options: options that benefit most have underlying volatility less than 40, underlying equity bid-ask spread less than 50 basis points, at least one trade a day, and a distribution of depth skewed toward marketable prices.
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Department/Agency | Bank of Canada. |
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Title | Options decimalization / by Faith Chin and Corey Garriott. |
Series title | Staff working paper, 1701-9397 ; 2016-57 |
Publication type | Series - View Master Record |
Language | [English] |
Format | Electronic |
Electronic document | |
Note(s) | "December 2016." Includes bibliographic references. |
Publishing information | [Ottawa] : Bank of Canada, 2016. |
Author / Contributor | Chin, Faith. Garriott, Corey. |
Description | ii, 31 p. : figures. |
Catalogue number |
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Subject terms | Capital markets Regulation |
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