Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/230202
Authors: 
Entrop, Oliver
Fischer, Georg
Year of Publication: 
2020
Citation: 
[Journal:] Journal of Futures Markets [ISSN:] 1096-9934 [Volume:] 40 [Issue:] 7 [Pages:] 1049-1071
Abstract: 
Evaluating more than 317,000 discount certificates in the German secondary market, we find that premiums and spreads are endogenous and negatively related but depend on different key determinants. The fundamental determinants of the premiums are mainly profit‐related, that is, dividends of the underlying, issuers’ credit risk, lifecycle effect, and competition, whereas hedging costs are less important. However, initial hedging costs (IHC) are priced into the premium in the case of large inventory changes. The spread is mostly determined by hedging costs and risk components, such as IHCs, rebalancing costs, volatility, scalper risk, and overnight gap risk—but also by dividends.
Subjects: 
derivatives
discount certificates
hedging
market microstructure
pricing
trading costs
Persistent Identifier of the first edition: 
Creative Commons License: 
http://creativecommons.org/licenses/by-nc-nd/4.0/
Document Type: 
Article
Document Version: 
Published Version

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