Arbitrage opportunities and efficiency of an option market at its initial stage: The case of KOSPI 200 options in Korea
ISBN: 978-1-84855-446-7, eISBN: 978-1-84855-447-4
Publication date: 27 February 2009
Abstract
The KOSPI 200 options at its initial stage generated a significant number of violations in no-arbitrage conditions which involve both options and the underlying index. However, when the arbitrage conditions are formed independent of the underlying index, the average size of violation is not large and few arbitrage opportunities exist. There are more frequent violations on near-maturity days, with in-the-money options and larger violation sizes during opening and closing hours. The arbitrage opportunities remain intact even after realistic transaction costs are taken into account and index futures prices are used instead of the stock index in an alternative specification.
Citation
Byoun, S. and Young Park, H. (2009), "Arbitrage opportunities and efficiency of an option market at its initial stage: The case of KOSPI 200 options in Korea", Chen, A.H. (Ed.) Research in Finance (Research in Finance, Vol. 25), Emerald Group Publishing Limited, Leeds, pp. 269-301. https://doi.org/10.1108/S0196-3821(2009)0000025012
Publisher
:Emerald Group Publishing Limited
Copyright © 2009, Emerald Group Publishing Limited