Options illiquidity in an over-the-counter market
本文发现搜索强度决定非流动性货币期权是溢价还是折价交易：在独立搜索市场中，非流动性导致溢价；在有交易所上市期权替代时，非流动性导致折价。
This article reveals that the intensity of search determines whether illiquid currency options trade at premia or at discounts. For options in a standalone search market, illiquidity leads to price premia, as intermediating dealers, who are presumably short in the equilibrium, demand additional compensation. With the presence of listed options at exchanges, illiquidity results in price discounts, as dealers provide concessions for customers’ alternative trading opportunities. The presence of substitutes changes the market outcome. Illiquidity premia and discounts coexist in a sufficiently one-sided market.