However, when analyzing the 16 to 45 days window prior to contract expiration, it is possible to notice an increase in the bid ask spread for the May 2016 contract (C K06).
Chart 2) CORRELATION COEFFICIENTS BETWEEN THE BID ASK SPREAD ESTIMATES, FOR B3 MARKETS (BOTTOM) AND FOR CBOT MARKETS (TOP) AQS ROLL CDP CSS TW CFTC AQS 0,730 0,780 0,678 0,680 0,602 ROLL 0,170 0,998 0,907 0,867 0,800 CDP 0,287 0,995 0,908 0,859 0,790 CSS 0,210 0,941 0,915 0,818 0,735 TW 0,460 0,367 0,562 0,337 0,850 CFTC 0,560 0,340 0,344 0,267 0,626 * ROLL stands for Roll model; CSS stands for the Choi, Salandro, and Shastri model; CDP stands for Chu, Ding, and Pyun model; TW stands for the Thompson and Walley model; CFTC stands for the Wang, Yau, and Baptiste model and AQS stands for the Absolute Quoted Spread.
Approximately half of all December, 1995 and January, 1996 closes were reported to have occurred inside the closing bid ask spread
compared to approximately 40% of the December, 1996 and January, 1997 closes inside the spread.
If we assume that the increase in demand for the options from A1([lambda]) to A2([lambda]), for a fixed supply B([lambda]), is such that the following three assumptions are satisfied then it is possible to give the necessary and sufficient conditions under which increased transactions demand yield increased volume and narrower bid ask spreads