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Implied transaction costs by leland option pricing models: A new approach and empirical evidence

Estimation of transaction costs in stock market is an important issue for stock trading, asset pricing, andstock market regulation etc. and it is often done by combining the bid-ask spread estimate with commissions and other fees provided by market participants which can be subjective. This study ai...

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Main Authors: Abdullah, Mimi Hafizah, Li, Steven
Format: Conference or Workshop Item
Language:English
Published: 2011
Subjects:
QA Mathematics
Online Access:http://irep.iium.edu.my/11565/1/Darwin_conference_2011_mimi.pdf
http://irep.iium.edu.my/11565/
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spelling my.iium.irep.115652012-01-04T04:43:09Z http://irep.iium.edu.my/11565/ Implied transaction costs by leland option pricing models: A new approach and empirical evidence Abdullah, Mimi Hafizah Li, Steven QA Mathematics Estimation of transaction costs in stock market is an important issue for stock trading, asset pricing, andstock market regulation etc. and it is often done by combining the bid-ask spread estimate with commissions and other fees provided by market participants which can be subjective. This study aims to offer an innovative way as an alternative to estimate the total transaction costs in stock trading via the implied transaction costs by using the Leland option pricing models. The effectiveness of this new approachis tested by using the S&P/ASX 200 index call options data.Based on the actual transaction costs on the Australian Securities Exchange (ASX) documented by previous studies and the Roll’s model,the empirical results reveal that this new approach can provide a reliable transaction costs estimate on stock trading in the ASX.Furthermore, the accuracy of the implied transaction costs and across option moneyness and maturity is investigated. 2011-07-05 Conference or Workshop Item REM application/pdf en http://irep.iium.edu.my/11565/1/Darwin_conference_2011_mimi.pdf Abdullah, Mimi Hafizah and Li, Steven (2011) Implied transaction costs by leland option pricing models: A new approach and empirical evidence. In: 2011 Accounting and Finance Association of Australia and New Zealand (AFAANZ) Conference, 3-5 July 2011, Darwin, Australia. (Unpublished)
institution Universiti Islam Antarabangsa Malaysia
building IIUM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider International Islamic University Malaysia
content_source IIUM Repository (IREP)
url_provider http://irep.iium.edu.my/
language English
topic QA Mathematics
spellingShingle QA Mathematics
Abdullah, Mimi Hafizah
Li, Steven
Implied transaction costs by leland option pricing models: A new approach and empirical evidence
description Estimation of transaction costs in stock market is an important issue for stock trading, asset pricing, andstock market regulation etc. and it is often done by combining the bid-ask spread estimate with commissions and other fees provided by market participants which can be subjective. This study aims to offer an innovative way as an alternative to estimate the total transaction costs in stock trading via the implied transaction costs by using the Leland option pricing models. The effectiveness of this new approachis tested by using the S&P/ASX 200 index call options data.Based on the actual transaction costs on the Australian Securities Exchange (ASX) documented by previous studies and the Roll’s model,the empirical results reveal that this new approach can provide a reliable transaction costs estimate on stock trading in the ASX.Furthermore, the accuracy of the implied transaction costs and across option moneyness and maturity is investigated.
format Conference or Workshop Item
author Abdullah, Mimi Hafizah
Li, Steven
author_facet Abdullah, Mimi Hafizah
Li, Steven
author_sort Abdullah, Mimi Hafizah
title Implied transaction costs by leland option pricing models: A new approach and empirical evidence
title_short Implied transaction costs by leland option pricing models: A new approach and empirical evidence
title_full Implied transaction costs by leland option pricing models: A new approach and empirical evidence
title_fullStr Implied transaction costs by leland option pricing models: A new approach and empirical evidence
title_full_unstemmed Implied transaction costs by leland option pricing models: A new approach and empirical evidence
title_sort implied transaction costs by leland option pricing models: a new approach and empirical evidence
publishDate 2011
url http://irep.iium.edu.my/11565/1/Darwin_conference_2011_mimi.pdf
http://irep.iium.edu.my/11565/
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score 13.188404

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