At the start of this year, we consider the liquidity of the options market in Europe after numerous discussions have highlighted the apparent worsening of liquidity conditions. We compare the open interest in terms of notional for the Eurostoxx50 index options and the total amount of open interest of the 50 members of the index since 2005.

Figure 1

Generally, the interest in trading single stock options has gradually decreased in the period since 2007, and the ratio of the index open interest to single stock open interest shows several key dates in the period of declining liquidity. The first spike occurred in October 2008, following the Lehman Brothers bankruptcy, when the single stock variance swap market effectively disappeared due to large losses faced on these products by the investment banking community. It is important to note that our liquidity analysis....


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