Strathprints logo
Strathprints Home | Open Access | Browse | Search | User area | Copyright | Help | Library Home | SUPrimo

A study of mispricing and parity in the Hang Seng futures and options markets

Lai, Kelvin Wai Lung and Marshall, Andrew (2002) A study of mispricing and parity in the Hang Seng futures and options markets. Review of Pacific Basin Financial Markets and Policies, 5 (3). pp. 373-394. ISSN 0219-0915

Full text not available in this repository. (Request a copy from the Strathclyde author)

Abstract

This paper examines mispricing, volatility and parity on the Hang Seng Index (HSI) options and futures market. Most of the previous research has focused on futures contracts; we update this research and extend it by considering also option contracts. It is also important to examine these issues post 1997 Asian crisis. We find mispricing of HSI futures and option contracts if no transaction costs were considered. However, by incorporating transaction costs, the HSI futures are bounded within the arbitrage free region and most of the mispricing of the HSI options disappears. Additional tests on the mispricing series reveals that most of the derivative HSI contracts are positively autocorrelated and that the mispricing series for both derivative contracts are not identical among the different contract months. From our results we cannot conclude that there is causal relationship between the mispricing and the spot index volatility. Finally, our empirical results show that for HSI derivative contractsfuture and option parity holds, supporting our mispricing test that the HSI derivative market is efficient and has not been adversely affected by the Asian economic crisis.

Item type: Article
ID code: 5539
Keywords: futures, options, index, mispricing, volatility, parity, Commerce, Finance, Economics and Econometrics
Subjects: Social Sciences > Commerce
Department: Strathclyde Business School > Accounting and Finance
Related URLs:
    Depositing user: Strathprints Administrator
    Date Deposited: 02 Mar 2008
    Last modified: 04 Sep 2014 15:15
    URI: http://strathprints.strath.ac.uk/id/eprint/5539

    Actions (login required)

    View Item