An Empirical Study Of The Cross Market Efficiency Of The Index Options Market
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Author | : Izidin El Kalak |
Publisher | : |
Total Pages | : 36 |
Release | : 2018 |
Genre | : |
ISBN | : |
This study examines the cross-market efficiency of the FTSE/MIB index options contracts traded on the Italian derivatives market (IDEM) between 1st October 2007 and 31st December 2012, a period including the financial crisis, using daily option prices. Two fundamental no-arbitrage conditions are tested: the lower boundary condition (LBC) and the put/call parity (PCP) condition while taking into account the role of transaction costs in mitigating the number of violations reported. Ex-post tests of LBC and PCP revealed a low incidence of mispricing in this market. Furthermore, to check the robustness of the results obtained by the ex-post tests, ex-ante tests were applied to PCP violations occurring within a one-day lag. The results showed a significant drop in the number of profitable arbitrage strategies. Overall, the number and monetary value of the violations reported declined during the post financial crisis period compared to those during the financial crisis period. The findings obtained from these tests generally support the cross-market efficiency of the Italian index options market during the sample period, though some violations were occasionally reported.
Author | : |
Publisher | : |
Total Pages | : 86 |
Release | : 1992 |
Genre | : |
ISBN | : |
Author | : Anuradha Kandikuppa |
Publisher | : |
Total Pages | : 250 |
Release | : 1999 |
Genre | : Options (Finance) |
ISBN | : |
Author | : Yehuda Atai |
Publisher | : |
Total Pages | : 570 |
Release | : 1976 |
Genre | : Capital assets pricing model |
ISBN | : |
Author | : Andrew Ang |
Publisher | : Now Publishers Inc |
Total Pages | : 99 |
Release | : 2011 |
Genre | : Business & Economics |
ISBN | : 1601984685 |
The Efficient Market Hypothesis (EMH) asserts that, at all times, the price of a security reflects all available information about its fundamental value. The implication of the EMH for investors is that, to the extent that speculative trading is costly, speculation must be a loser's game. Hence, under the EMH, a passive strategy is bound eventually to beat a strategy that uses active management, where active management is characterized as trading that seeks to exploit mispriced assets relative to a risk-adjusted benchmark. The EMH has been refined over the past several decades to reflect the realism of the marketplace, including costly information, transactions costs, financing, agency costs, and other real-world frictions. The most recent expressions of the EMH thus allow a role for arbitrageurs in the market who may profit from their comparative advantages. These advantages may include specialized knowledge, lower trading costs, low management fees or agency costs, and a financing structure that allows the arbitrageur to undertake trades with long verification periods. The actions of these arbitrageurs cause liquid securities markets to be generally fairly efficient with respect to information, despite some notable anomalies.
Author | : Hongbing Cheng |
Publisher | : Springer Nature |
Total Pages | : 635 |
Release | : 2024 |
Genre | : |
ISBN | : 9464635061 |
Author | : William W. Welch |
Publisher | : |
Total Pages | : 40 |
Release | : 1982 |
Genre | : Hedging (Finance) |
ISBN | : |
Author | : Ramesh Rao |
Publisher | : |
Total Pages | : 27 |
Release | : 1978 |
Genre | : |
ISBN | : |
Author | : Wing-Keung Wong |
Publisher | : Mdpi AG |
Total Pages | : 232 |
Release | : 2022-02-17 |
Genre | : Business & Economics |
ISBN | : 9783036530802 |
The Efficient Market Hypothesis believes that it is impossible for an investor to outperform the market because all available information is already built into stock prices. However, some anomalies could persist in stock markets while some other anomalies could appear, disappear and re-appear again without any warning. A Special Issue on "Efficiency and Anomalies in Stock Markets" will be devoted to advancements in the theoretical development of market efficiency and anomaly in the Stock Market, as well as applications in Stock Market efficiency and anomalies.
Author | : Niclas Hagelin |
Publisher | : |
Total Pages | : |
Release | : 2003 |
Genre | : |
ISBN | : |
This study investigates the relationship between option market activity and cash market volatility on the OMX index. Option market activity is defined as trading volume divided by open interest and is assumed to reflect the specific impact of speculation. The study contributes by investigating empirical evidence relating to two periods with different market conditions. The findings show that for the complete sample period there is unidirectional causality from cash market volatility to option market activity for calls and puts jointly, as well as for calls and puts respectively. While unidirectional causality from cash market volatility to call option market activity is documented for both the sub-periods, bilateral causality between put option market activity and cash market volatility was found for one of the sub-periods. Finally, to further investigate the potential impact of index options on the volatility of the underlying cash market the expected and unexpected components of option market activity, trading volume, and open interest were also investigated.