CAC40 Index Options' Market Efficiency

2005 ◽  
Author(s):  
Olfa Belhassine ◽  
Chokri Mamoghli
Keyword(s):  
Market Efficiency ◽  
Options Market ◽  
Index Options

scholarly journals The cross-market efficiency of the Italian derivatives market

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Izidin El Kalak ◽  
Robert Hudson
Keyword(s):  
Financial Crisis ◽  
Market Efficiency ◽  
Options Market ◽  
Index Options ◽  
Content Type ◽  
No Arbitrage ◽  
Crisis Period ◽  
Ex Post ◽  
The Cross ◽  
The Impact

Purpose This study aims to examine the cross-market efficiency of the FTSE/MIB index options contracts traded on the Italian derivatives market (IDEM) during a period including the financial crisis between 1st October 2007 and 31st December 2012 using daily option prices. Design/methodology/approach Two fundamental no-arbitrage conditions were 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. Findings The results showed a significant drop in the number of profitable arbitrage strategies. The findings obtained from all these tests generally support the cross-market efficiency of the Italian index options market during the sample period, though some violations were occasionally reported. 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. Research limitations/implications This study can be extended to test the relationships between arbitrage profitability and other factors such as the moneyness (in the money, out of the money, at the money) of options and the maturity of options. Options market efficiency tests can be conducted such as call and put spreads, box spreads and put/call convexities (butterfly spreads). Originality/value There are several factors that influenced the decision to test the Italian index options market. First, the limited number of studies conducted on this market. Second, the fact that the two main studies on this market are relatively old, which makes it interesting to test the efficiency of this market with respect to a new set of data, taking into account the introduction of the Euro and the impact of the recent financial crisis on this market and whether the market efficiency hypothesis holds during the period of crisis. Third, it is important to consider the effect of the new rules applied to this market.

An Empirical Test of Cross-Market Efficieny of Indian Index Options Market Using Put-Call Parity Condition

2015 ◽  
Vol 6 (2) ◽  
Author(s):  
Debaditya Mohanti ◽  
P. K. Priyan
Keyword(s):  
Sensitivity Analysis ◽  
Market Efficiency ◽  
Transaction Cost ◽  
Empirical Test ◽  
Futures Contracts ◽  
Options Market ◽  
Futures Prices ◽  
Index Options ◽  
Cash Market ◽  
Parity Condition

The purpose of the present study is to examine the cross market efficiency of the Indian index options, futures and cash market by testing S&P CNX Nifty index options, by Put-Call Parity condition using spot index values and futures prices. Over a period from April 01, 2008 to March 31, 2012, the daily closing prices of nifty index options contracts, spot values and futures contracts have been used in this research. The results of the sensitivity analysis of violations with respect to time to maturity and moneyness demonstrates that the majority of violations in options contract are exploitable, however, the proportion of exploitable violations severely falls after considering the transaction cost, as most of the profits were wiped out and showing negative profits. Thus, although the Indian index options market shows traces of inefficiency, in totality it is suggested that the Indian index options market is efficient as majority of violations are un-exploitable after incorporating transaction cost.

The Martingale Restriction and Relative Market Efficiency between KOSPI 200 Index and Index Options Market

2015 ◽  
Vol 23 (3) ◽  
pp. 367-389
Author(s):  
Tae-Hun Kang ◽  
Myung-Chul Lee
Keyword(s):  
Time Series ◽  
Market Efficiency ◽  
Trading Volume ◽  
Approximate Entropy ◽  
Stock Index ◽  
Informational Efficiency ◽  
Options Market ◽  
Index Options ◽  
Directional Information ◽  
Price Differences

This paper examines the martingale restriction for the KOSPI 200 index options market. And in cases of the rejections, we investigate the relative market efficiency between stock index and stock index options market, using approximate entropy (ApEn) method proposed by Pincus (1994), which quantifies a complexity, irregularity and unpredictability in time series. The empirical results of this study clearly reject the martingale restriction and regression analyses indicate that the historical returns of underlying index can explain about 25% of the price differences between option-implied and market index prices but the total trading volume can explain only a small portion of the price differences. These results have cast doubt on the informational efficiency of this market. Comparing the relative market efficiency based on ApEn have showed that the complexity or irregularity of KOSPI 200 index is larger than the index options during the entire sample period. But, Examining separately ApEn of the magnitude and the sign time series which compose log-returns document that stock index options market reflect more efficiently the information about the direction of price changes than the stock index market in 2014 and the efficiency of the index options market about the directional information may be affected by directional traders who prefer certain strategies designed by exploiting past stock market movements.

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