Arbeitspapier
Investors with too many options?
During the last decade, markets for covered warrants (bank-issued options) have flourished in Europe and Asia. In these markets, investors often face a choice between many instruments that differ only slightly from each other. Based on retail trades in call options on the German DAX index, this paper documents substantial price dispersion across securities that are close substitutes. Moreover, investors generally fail to identify attractively priced options. The results suggest that the observed product proliferation imposes a substantial search cost on investors even though the products are homogenous and their pricing is well understood. The search cost is estimated to average 1% of the amount invested, the same order of magnitude as the average spread.
- Language
-
Englisch
- Bibliographic citation
-
Series: ECB Working Paper ; No. 1197
- Classification
-
Wirtschaft
Portfolio Choice; Investment Decisions
Contingent Pricing; Futures Pricing; option pricing
Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- Subject
-
investor behavior
OTC derivatives
price dispersion
search costs
OTC-Handel
Optionsgeschäft
Preisstreuung
Anlageverhalten
Informationskosten
Deutschland
- Event
-
Geistige Schöpfung
- (who)
-
Dorn, Daniel
- Event
-
Veröffentlichung
- (who)
-
European Central Bank (ECB)
- (where)
-
Frankfurt a. M.
- (when)
-
2010
- Handle
- Last update
-
10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Dorn, Daniel
- European Central Bank (ECB)
Time of origin
- 2010
Other Objects (12)
Trust: A Concept Too Many
Too Many Resources or Too Few? What Drives International Conflicts?
Too many cooks? Committees in monetary policy
Too many cooks?: committees in monetary policy
Too many cooks? Committees in monetary policy
Merger control in Ireland: Too many unnecessary merger notifications?
Ending "Too Big To Fail": Government Promises versus Investor Perceptions
Too Many Men, Too Short Lives: The Effect of the Male-Biased Sex Ratio on Mortality
Too-many-to-fail and the design of bailout regimes
Too many to fail? Inter-enterprise arrears in transition economies
Asking one too many? Why leaders need to be decisive
Too Many Cooks? The German Joint Diagnosis and Its Production
Trust: A Concept Too Many
Too Many Resources or Too Few? What Drives International Conflicts?
Too many cooks? Committees in monetary policy
Too many cooks?: committees in monetary policy
Too many cooks? Committees in monetary policy
Merger control in Ireland: Too many unnecessary merger notifications?
Ending "Too Big To Fail": Government Promises versus Investor Perceptions
Too Many Men, Too Short Lives: The Effect of the Male-Biased Sex Ratio on Mortality
Too-many-to-fail and the design of bailout regimes
Too many to fail? Inter-enterprise arrears in transition economies
Asking one too many? Why leaders need to be decisive
Too Many Cooks? The German Joint Diagnosis and Its Production
Trust: A Concept Too Many
Too Many Resources or Too Few? What Drives International Conflicts?
Too many cooks? Committees in monetary policy
Too many cooks?: committees in monetary policy
Too many cooks? Committees in monetary policy
Merger control in Ireland: Too many unnecessary merger notifications?
Ending "Too Big To Fail": Government Promises versus Investor Perceptions
Too Many Men, Too Short Lives: The Effect of the Male-Biased Sex Ratio on Mortality
Too-many-to-fail and the design of bailout regimes
Too many to fail? Inter-enterprise arrears in transition economies
Asking one too many? Why leaders need to be decisive