An analysis of the arbitrage efficiency of the Chinese SSE 50ETF options market

Zhang, Huiming; Watada, Junzo

doi:10.1016/j.iref.2018.10.011

Cited by 14 publications

(5 citation statements)

References 25 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Evaluations of the resistance raised by the options market to offset adverse trends in the stock market are based on the theory that a market is efficient when it does not allow the participants to gain abnormal and excess earnings from it (Fama, 1970), and the initial examinations were on the predictability of the options prices using various theoretical models (Evnine & Rudd, 1984). Other empirical methods for scrutinizing the ability of the options market to perform its fundamental function are assessments of internal market efficiency as well as cross market efficiency, where the former is measured in terms of no-arbitrage association prevailing within the options market (Aggarwal & Gupta, 2009;Zhang & Watada, 2019) and the latter is assessed with regard to the arbitrage free affiliations among the options and other markets (Kamara & Miller, 1995;Vipul, 2008;Mutum & Das, 2019). But these methods seldom validate the prime purpose of the options, as they fail to account for instantaneous simultaneity among the options market and its underlying spot market in reflecting substantial information (Chan, Chung, & Johnson, 1993), which leads to arbitrage earnings (Hentze & Seiler, 2000).…”

Section: Review Of Literaturementioning

confidence: 99%

Ideal Investment Protection in Optimistic Perceptions: Evidence From the Indian Equity Options Market

Jose

Varghese

2021

IJFR

View full text Add to dashboard Cite

The study is an experiential assessment on the ability of the Indian equity options market to resist the adverse impacts that arise from unexpected changes in the underlying equity market, focusing on two distinct investor perceptions within optimistic dimension in the market, viz. the recovery phase and the growth phase, which were evident in the Indian market scenario post the period of financial upheavals due to global economic crisis during the latter half of 2000s. The risk mitigation capability of the options is examined in terms of long run integration and short run re-equilibrating relationship shown by near month calls and puts with varied stages of exercisability with their underlying equity segment in the National Stock Exchange of India. Further, the ideal hedge sizes of the options and the hedge gains resulting from affecting them in the investment profile are identified under minimum variance framework, using Diagonal BEKK GARCH. The results are indicative that all different options segments express to have the expected resistance ability during both bullish perceptions under consideration, and prove that optimal use of options with equity portfolio provides assured hedge gains in terms of reduction in un-anticipatable variances.

show abstract

Section: Review Of Literaturementioning

confidence: 99%

Ideal Investment Protection in Optimistic Perceptions: Evidence From the Indian Equity Options Market

Jose

Varghese

2021

IJFR

View full text Add to dashboard Cite

show abstract

“…The prediction of the actual options premium using theoretical pricing models was the early method of testing the efficiency of the options market (Evnine & Rudd, 1984). Later this efficiency was tested by exploring the no-arbitrage association among different options segments or between the options market and its underlying market such as put-call parity, monotonicity property and no-arbitrage boundaries (Kamara & Miller, 1995;Kumar & Raman, 2017;Mittnik & Rieken, 2000;Mutum & Das, 2019;Vipul, 2008) and further by testing no-arbitrage relationship existing within the options market itself including put and call spread, box spread and butterfly spread (Ackert & Tian, 2001;Aggarwal & Gupta, 2009;Mohanti & Priyan, 2014;Zhang & Watada, 2019). But mere efficiency hardly ever warrants risk mitigation by the options market when it fails to confirm instantaneity with the underlying market in absorption and reflection of information (Chan et al, 1993).…”

Section: Relative Informational Efficiency Of the Options And Stocksmentioning

confidence: 99%

Tackling Investment Risks Using Equity Options During Extreme Economic Upheavals: Indian Evidence

Jose

Varghese

2021

Colombo Bus. J

View full text Add to dashboard Cite

The study is an empirical scrutiny on the Indian equity options market to examine whether it facilitates the reduction of investment risks, focusing on an economic sphere with financial upheavals. The risk mitigation ability is examined with respect to the integration of nearmonth call and put options markets having different levels of exercisability with the equity market in the National Stock Exchange of India. The optimal size of options contracts required for establishing a hedge portfolio that minimises the risk exposure to a maximum possible magnitude and the level of gains resulting from such hedges are identified following the minimum variance approach, using Diagonal BEKK GARCH. The results indicate that ATM, ITM, and DITM call options and ATM, OTM, DOTM, and DITM put options provide effective risk reduction that can be efficiently utilised by the existing as well as prospective investors in the equity market.

show abstract

“…For the purpose of exploring the PDF of the asset price and interval option pricing when the constraint satisfactory degree is 0 and 1, respectively, we selected the China SSE 50 ETF call option [ 27 , 28 ]. This includes the highest and lowest prices, with the maturity date of 22 June and 28 September as established at 20 April 2016.…”

Section: Empirical Analysesmentioning

confidence: 99%

Pricing Interval European Option with the Principle of Maximum Entropy

Liu

Zhou

Xiong

et al. 2019

Entropy

View full text Add to dashboard Cite

This paper develops the interval maximum entropy model for the interval European option valuation by estimating an underlying asset distribution. The refined solution for the model is obtained by the Lagrange multiplier. The particle swarm optimization algorithm is applied to calculate the density function of the underlying asset, which can be utilized to price the Shanghai Stock Exchange (SSE) 50 Exchange Trades Funds (ETF) option of China and the Boeing stock option of the United States. Results show that maximum entropy distribution provides precise estimations for the underlying asset of interval number situations. In this way, we can get the distribution of the underlying assets and apply it to the interval European option pricing in the financial market.

show abstract

An analysis of the arbitrage efficiency of the Chinese SSE 50ETF options market

Cited by 14 publications

References 25 publications

Ideal Investment Protection in Optimistic Perceptions: Evidence From the Indian Equity Options Market

Ideal Investment Protection in Optimistic Perceptions: Evidence From the Indian Equity Options Market

Tackling Investment Risks Using Equity Options During Extreme Economic Upheavals: Indian Evidence

Pricing Interval European Option with the Principle of Maximum Entropy

Contact Info

Product

Resources

About