The lifecycle of exchange-traded derivatives

We present our analysis as a non-stationary Markov model, estimated using Bayesian methods. This approach offers simple summary statistics to inform the launch of a new derivatives contract, organized in a model that describes the dynamics of the derivatives market as a whole. This facilitates distributional comparisons among historical groups of contracts (e.g. across time, exchange, or product type) as well as simulation of new derivatives emerging over time.