Abstract
The impact of derivatives is almost invariably measured by the liquidity outcomes on the underlying. We explore the relationship between efficiency, fairness and derivatives with respect to the underlying. We provide evidence that the presence of a derivative improves liquidity in the underlying but decreases the degree of fairness - proxied by manipulation likelihood. Our study highlights that a leveraged derivative entices manipulation in the underlying and that typical inhibitors to manipulation, namely high visible execution costs, are in fact desirable.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
