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Author: Kee-Hong Bae Publisher: ISBN: Category : Languages : en Pages :
Book Description
This study utilizes both real-time transaction prices and bid-ask quotes in evaluating the profitability of arbitrage strategies for the Hong Kong index futures and index options market. Taking into account the bid-ask spread in identifying arbitrage opportunities, we avoid the selection bias problem associated with using transaction prices. The percentage of observations violating no-arbitrage bounds is significantly reduced when we employ bid-ask quotes instead of transaction prices. This suggests that studies which implement arbitrage strategies based on transaction prices employ prices from the wrong side of the spread. We find a relationship between the frequency of violations (evaluated from transaction prices) and the size of bid-ask spreads in the futures and options markets. This indicates that a larger mispricing, which may arise when the bid-ask spread is wider, does not necessarily imply profitable arbitrage opportunity.
Author: Kee-Hong Bae Publisher: ISBN: Category : Languages : en Pages :
Book Description
This study utilizes both real-time transaction prices and bid-ask quotes in evaluating the profitability of arbitrage strategies for the Hong Kong index futures and index options market. Taking into account the bid-ask spread in identifying arbitrage opportunities, we avoid the selection bias problem associated with using transaction prices. The percentage of observations violating no-arbitrage bounds is significantly reduced when we employ bid-ask quotes instead of transaction prices. This suggests that studies which implement arbitrage strategies based on transaction prices employ prices from the wrong side of the spread. We find a relationship between the frequency of violations (evaluated from transaction prices) and the size of bid-ask spreads in the futures and options markets. This indicates that a larger mispricing, which may arise when the bid-ask spread is wider, does not necessarily imply profitable arbitrage opportunity.
Author: Michael Lee Hemler Publisher: ISBN: Category : Languages : en Pages :
Book Description
We examine the riskless box spread trading strategy before and after the 1987 Market Crash using intraday data for Samp;P 500 Index (SPX) options. We find that the Crash had a significant impact on trading profitability. Before the Crash, apparently profitable trading opportunities were rare and simulated trades based on such opportunities were unprofitable. For approximately three weeks after the Crash, however, apparently profitable trading opportunities occurred frequently and the corresponding simulated trades produced arbitrage profits. These post-Crash profits accompanied an increased bid-ask spread and a decreased number of trades and price quotes, suggesting increased uncertainty on the part of traders regarding the value of the Samp;P 500 Index. Nonetheless, traders apparently stood by their quotes--in the post-Crash period, all trades occurred within the bid-ask spread and the number of contracts per trade did not drop substantially from its pre-Crash level.
Author: John Shon Publisher: FT Press ISBN: 0132615851 Category : Business & Economics Languages : en Pages : 225
Book Description
Profit from earnings announcements, by taking targeted, short-term option positions explicitly timed to exploit them! Based on rigorous research and huge data sets, this book identifies the specific earnings-announcement trades most likely to yield profits, and teaches how to make these trades—in plain English, with real examples! Trading on Corporate Earnings News is the first practical, hands-on guide to profiting from earnings announcements. Writing for investors and traders at all experience levels, the authors show how to take targeted, short-term option positions that are explicitly timed to exploit the information in companies’ quarterly earnings announcements. They first present powerful findings of cutting-edge studies that have examined market reactions to quarterly earnings announcements, regularities of earnings surprises, and option trading around corporate events. Drawing on enormous data sets, they identify the types of earnings-announcement trades most likely to yield profits, based on the predictable impacts of variables such as firm size, visibility, past performance, analyst coverage, forecast dispersion, volatility, and the impact of restructurings and acquisitions. Next, they provide real examples of individual stocks–and, in some cases, conduct large sample tests–to guide investors in taking advantage of these documented regularities. Finally, they discuss crucial nuances and pitfalls that can powerfully impact performance.
Author: iMinds Publisher: iMinds Pty Ltd ISBN: 1921798602 Category : Business & Economics Languages : en Pages : 5
Book Description
Learn about Arbitrage with iMinds Money's insightful fast knowledge series. Arbitrage is defined as attempting to profit by exploiting price differences of identical or similar financial instruments between two or more markets. The difference between the two market prices is the profit or spread. The term is usually used to describe transaction involving financial instruments such as stock, bonds, commodities, currencies and derivatives. A person or institution that practises arbitrage is known as an arbitrageur. When used academically, arbitrage refers to transactions in which there is no neg.
Author: Steven Li Publisher: ISBN: Category : Arbitrage Languages : en Pages : 44
Book Description
This paper is concerned with arbitrage efficiency of the Nikkei index option contracts traded on the Osaka Securities Exchange (OSE) within the put-call parity (PCP) framework. A thorough ex post analysis is first carried out. The results reveal a modest number of violations with 2.74% of the sample breaching the PCP equation and an average arbitrage profit of 22.61 index points for OSE member firms during the sample period (2003-05). Ex ante tests are then conducted whereby ex post profitable arbitrage strategies, signified by the matched put and call contracts, are executed with lags of 1 minute and 3 minutes. The ex ante results reveal that the number of profitable arbitrage opportunities and the average profit are both reduced significantly with an execution lag. In addition, regression analysis is used to provide further evidence about the PCP and arbitrage profitability. Overall, there is no strong evidence found against the efficiency of the Nikkei 225 options market, though arbitrage opportunities do exist occasionally.--Author's abstract.
Author: Takatoshi Itō Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
With the high-frequency data of firm quotes in the transaction platform of foreign exchanges, arbitrage profit opportunities--in the forms of a negative bid-ask spread of a currency pair and triangular transactions involving three currency pairs--can be detected to emerge and disappear in the matter of seconds. The frequency and duration of such arbitrage opportunities have declined over time, most likely due to the emergence of algorithmic trading. When a human trader detects such an arbitrage opportunity and places orders for multiple transactions--two in negative spreads and three in triangular arbitrage--there is no guarantee all of those orders are fulfilled in a fraction of one second. Thus, the arbitrageur has to consider execution risk, when he/she/it detects the emergence of such an opportunity. The novelty of this paper is to show that those arbitrage opportunities were exploitable and executable, before the mid-2000s, even considering the transactions costs and execution risk. After many algorithmic computers were allowed to be connected directly to the EBS transaction platform in the mid-2000s, the frequency of free lunch cases has declined and probabilities of successful executions of all legs for arbitrage declined. We calculate the change in the expected profit of an attempt to execute necessary transactions to reap benefits from arbitrage opportunity.
Author: Peter B. Kenen Publisher: Princeton University Press ISBN: 0691231133 Category : Business & Economics Languages : en Pages : 566
Book Description
Drawing together new papers by some of today's leading figures in international economics and finance, Understanding Interdependence surveys the current state of knowledge on the international monetary system and, by implication, defines the research horizon for the future. Covering topics including the behavior of exchange rates, the choice of exchange-rate regime, current-account adjustment in classical and Keynesian models, the extent and effects of capital mobility, international debt, the stabilization and reform of the formerly planned economies, European monetary union, and international policy coordination, the book underscores the importance of these subjects and identifies lessons for policymakers. The contributors to the volume are Michael Bruno, Ralph C. Bryant, Richard N. Cooper, Michael P. Dooley, Barry Eichengreen, Stanley Fischer, Charles A. E. Goodhart, Peter Hooper, Peter B. Kenen, Paul R. Krugman, Henri Lorie, Jaime Marquez, Ronald I. McKinnon, Michael Mussa, Maurice Obstfeld, John Odling-Smee, Assaf Razin, Dani Rodrik, Mark P. Taylor, and John Williamson.
Author: Kee-Hong Bae
Author: Kee-Hong Bae
Author: Kee-hong Bae
Author: Michael Lee Hemler
Author: Ka Ming Camay Chan
Author: John Shon
Author: iMinds
Author: Steven Li
Author: Erik Remzi Sirri
Author: Takatoshi Itō
Author: Peter B. Kenen