Download or read book Early Unwinding of Futures Arbitrage written by Gilles B. Desvilles and published by . This book was released on 2009 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Cost of Carry Model posits that the price of a term contract is worth its underlying plus the cost of its carry minus its revenues. But when the contract is a future it is endowed with a pre-settlement feature and we show that it is proper to adjust the future price with the value of an implicit option said of early unwinding.In the presence of market bid-ask spreads, the option assimilates to either a call on a cash and carry position, or a put on the reverse position. With this option the no-pure-arbitrage range where the future freely fluctuates is narrower than the corresponding forward bid-ask spread, which means that future prices dominate forward prices. Our model respects future fungibility, fully characterizes the underlying synthetic asset of the option, and relies only on proved results.We value numerically the early unwinding option by risk-neutral valuation on a tree. For the short future maturities, the price in absence of transaction costs decreases significantly when these costs are introduced, but for long maturities the option price remains high. In some cases it is even so high that the futures becomes inefficient by continuously offering pure arbitrage opportunities.
Download or read book Early Unwinding Strategy in Index Options Futures Arbitrage written by Louis T. W. Cheng and published by . This book was released on 2001 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We first re-examine buy-and-hold arbitrage strategies using both ex-post and ex-ante index options and futures data in Hong Kong. The results show that the arbitrage profit is not large enough to cover the transaction costs for both individual and institutional investors. Second, we find that, when an early unwinding strategy is employed, the arbitrage profit improves significantly under an ex-post analysis but only improves slightly under an ex-ante analysis. In addition, opportunities for same-day unwinding are very limited. Finally, our regression results indicate that the magnitude of the arbitrage profit is positively related to the volatility of the stock market.
Download or read book Early Unwinding Strategy in Index Options futures Arbitrage written by Louis T. W. Cheng and published by . This book was released on 1998 with total page 18 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Early Unwinding of Options futures Arbitrage with Bid ask Quotations and Transaction Prices written by Joseph K. W. Fung and published by . This book was released on 2002 with total page 18 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Futures cash Arbitrage with Early Unwinding Opportunities and Inelastic Liquidity Demands written by Ian Cooper and published by . This book was released on 1991 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book A Comparsion Between an Ex ante and Ex post Test of Early Unwinding Strategy in Put call futures Arbitrage written by Wai Sun Pang and published by . This book was released on 1998 with total page 212 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Value of the Early Unwind Option in Futures Contracts with an Endogenous Basis written by Wolfgang Bühler and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper the implicit early unwind option of a risk-neutral arbitrageur is valued. The problem is analyzed in a market microstructure framework where four different groups of market participants interact. Within this model the equilibrium price relationship between stock and futures markets is determined. Since the underlying of the option is influenced by arbitrage trading, the underlying of the option depends, contrary to standard option theory, on the unwind option itself. The non-Markovian stochastic process of the basis is characterized, and the results of an extensive comparative static analysis of the option value are presented.
Download or read book Short Selling Unwinding and Mispricing written by Alexander Kempf and published by . This book was released on 1997 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper is concerned with the influence of index arbitrage trading on the mispricing process in the presence of market frictions. Specifically, it highlights the as yet ignored impact of short selling restrictions in the spot market and early unwinding opportunities on the mispricing process.A multiperiod equilibrium model of the mispricing between a stock index and index futures is developed to study the impact of optimal arbitrage trading on the mispricing. The model leads to the following main results. First, the mean reversion of the mispricing is arbitrage induced. Second, arbitrage trading and mean reversion of the mispricing depend on the behavior of the mispricing in the past. Third, the impact of arbitrage trading on the mispricing increases with a decreasing time to maturity of the futures contract. Finally, arbitrage trading keeps the mispricing away from zero in certain cases. This suggests that mispricing may not exist despite arbitrage trading but exist due to arbitrage trading.The hypotheses derived from the theoretical model are tested using intraday data for the German stock index DAX and DAX futures. Results concerning the level, the mean reversion and the path dependence of the mispricing are provided. They support the hypotheses stated above. Overall, the empirical evidence suggests that short selling restrictions and early unwinding opportunities are very influential factors for the behavior of the mispricing.
Download or read book Stock Index Futures written by Charles M.S. Sutcliffe and published by Routledge. This book was released on 2018-01-18 with total page 534 pages. Available in PDF, EPUB and Kindle. Book excerpt: The global value of trading in index futures is about $20 trillion per year and rising and for many countries the value traded is similar to that traded on their stock markets. This book describes how index futures markets work and clearly summarises the substantial body of international empirical evidence relating to these markets. Using the concepts and tools of finance, the book also provides a comprehensive description of the economic forces that underlie trading in index futures. Stock Index Futures 3/e contains many teaching and learning aids including numerous examples, a glossary, essay questions, comprehensive references, and a detailed subject index. Written primarily for advanced undergraduate and postgraduate students, this text will also be useful to researchers and market participants who want to gain a better understanding of these markets.
Download or read book Early Unwindings and Rollovers of Stock Index Futures Arbitrage Programs written by John Merrick and published by . This book was released on 1987 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Capital Market Development in Transition Economies Country Experiences and Policies for the Future written by OECD and published by OECD Publishing. This book was released on 1998-10-06 with total page 310 pages. Available in PDF, EPUB and Kindle. Book excerpt: The book, the first time, critically evaluates the evolution of both equity and securities markets in transition economies.
Download or read book Finance written by R.A. Jarrow and published by Elsevier. This book was released on 1995-12-15 with total page 1204 pages. Available in PDF, EPUB and Kindle. Book excerpt: Hardbound. The Handbook of Finance is a primary reference work for financial economics and financial modeling students, faculty and practitioners. The expository treatments are suitable for masters and PhD students, with discussions leading from first principles to current research, with reference to important research works in the area. The Handbook is intended to be a synopsis of the current state of various aspects of the theory of financial economics and its application to important financial problems. The coverage consists of thirty-three chapters written by leading experts in the field. The contributions are in two broad categories: capital markets and corporate finance.
Download or read book Futures Markets written by A. G. Malliaris and published by . This book was released on 1997 with total page 526 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Transparency and Fragmentation written by J. Board and published by Springer. This book was released on 2002-07-16 with total page 320 pages. Available in PDF, EPUB and Kindle. Book excerpt: This is the first major treatment of the effects of increased transparency on financial markets: an important and highly controversial issue for both traders and regulators. Focussing on three main themes - market transparency, the consolidation-fragmentation of trading systems, and the scope of regulation (i.e. which markets, and which traders within those markets, should be subject to regulation), the book highlights the importance of these issues to all markets throughout the world. The book draws on research from eight UK based investment exchanges, Deutsche Borse in Frankfurt and documentary evidence from the US markets and their regulators enabling the identification and documentation of the current situation and consideration of what fresh regulatory approaches are required for this new and fast evolving situation.
Download or read book Derivatives and Equity Portfolio Management written by Bruce M. Collins and published by John Wiley & Sons. This book was released on 1999-01-15 with total page 246 pages. Available in PDF, EPUB and Kindle. Book excerpt: Frank Fabozzi and Bruce Collins fully outline the ins and outs of the derivatives process for equity investors in Derivatives and Equity Portfolio Management. A significant investment tool of growing interest, derivatives offer investors options for managing risk in a diversified portfolio. This in-depth guide integrates the derivatives process into portfolio management and is replete with applications from authors with extensive Wall Street experience. Whether you're and individual investor or portfolio manager seeking to improve investment returns, you'll quickly learn about listed equity contracts, using listed options in equity portfolio management, risk management with stock index futures, OTC equity derivatives-and profit from your new found knowledge.
Download or read book International Trade Issues written by Robert V. Weeks and published by Nova Publishers. This book was released on 2006 with total page 296 pages. Available in PDF, EPUB and Kindle. Book excerpt: While some may dispute that economics is the driving force behind much of history, nobody can argue that trade is not a significant factor in international relations. This book assembles a collection of articles examining some of the divisive issues in the international trade arena. It serves as a tool for understanding the economic subjects.
Download or read book Differential Rates Residual Information Sets and Transactional Algebras written by Rodolfo Apreda and published by Nova Publishers. This book was released on 2006 with total page 306 pages. Available in PDF, EPUB and Kindle. Book excerpt: Both current theory and practice in financial markets are undergoing a strong pressure to include recently developed fields of inquiry, namely market microstructure, transaction costs and asymmetric information. This claim has been taking shape after nearly thirty years of worthy research and empirical development that laid sound groundwork to those promising subjects. The purpose of this book is to introduce a new approach to work out the returns from financial assets. Firstly, by means of the concept of differential rates, which allow the breaking down of the ordinary rate of return into components that are rates on their own. Secondly, residual information sets are built up to match each differential rate with its underlying information.
