Was there an option-listing effect for the IRX options?

Abstract

Properties of the 3-month Treasury bill rate changed on and around the listing date of the IRX options for which the Treasury bill rate is the underlying. The level of return declined, the volatility declined and dummy variables for the day of listing and the 2 days after are negative and significant in an econometric model. The changes are consistent with the option-listing effect observed with the listing of options on stocks and American Depositary Receipts (ADRs).

Keywords:

• option-listing effect
• interest rate options
• IRX
• efficiency

JEL Classification:

• G14
• G10

Acknowledgement

The author thanks Bruce McCullough, Wesley Gray and Eydis Olsen for their helpful comments.

Notes

¹ We found the results to be robust for 61-day, 141-day and 181-day sample periods.

² For example, the estimates for D ₀ are −0.175, −0.176, −0.144 and −0.146.