Change search
ReferencesLink to record
Permanent link

Direct link
Variance based efficiency test of OMX index option markat
Stockholm University, Faculty of Social Sciences, Stockholm Business School, Finance.
(English)In: European Journal of Finance, ISSN 1351-847X, E-ISSN 1466-4364Article in journal (Refereed) Submitted
Abstract [en]

n this paper, followed by the market efficiency definition of the absence of arbitrage opportunity in the market, we test the market efficiency of the OMXS30 index option market.

We first check the arbitrage opportunity by examining the boundary conditions and the

Put Call Parity that must be satisfied in the market. Then a variance based efficiency test is performed by establishing a

risk neutral portfolio and re-balancing the initial portfolio in different trading strategies. In order to choose the most appropriate model for option price and hedging strategies, we calibrate several most applied models, i.e. the Black Scholes, Merton, Heston, Bates, and Affine Jump Diffusion models. Our results indicate that the Affine Jump Diffusion model significantly outperforms other models in the option price forecast and the trading strategies. Both the boundary and the Put Call Parity tests and the dynamic hedging strategy give evidence that no significant abnormal returns can be obtained in the OMXS30 option market, thereby supporting the market efficiency.

Keyword [en]
Option markets, Efficiency test, Stochastic Volatility with Jumps, Mean variance hedge
National Category
Business Administration
Research subject
Business Administration
Identifiers
URN: urn:nbn:se:su:diva-129950OAI: oai:DiVA.org:su-129950DiVA: diva2:926200
Conference
Arne Ryde finance workshop, 2013
Available from: 2016-05-04 Created: 2016-05-04 Last updated: 2016-05-09Bibliographically approved

Open Access in DiVA

attachment(546 kB)4 downloads
File information
File name ATTACHMENT01.pdfFile size 546 kBChecksum SHA-512
d8d4fa4580b17ebfde74ad0beef411c3b4954fc776f67f0c279754b7839633b31170d4fb95375fa1d8a4f439db437e531313ceb754adcc0a749a01cc1a3a97bd
Type attachmentMimetype application/pdf

Search in DiVA

By author/editor
Ai Jun, Hou
By organisation
Finance
In the same journal
European Journal of Finance
Business Administration

Search outside of DiVA

GoogleGoogle Scholar
The number of downloads is the sum of all downloads of full texts. It may include eg previous versions that are now no longer available

Total: 52 hits
ReferencesLink to record
Permanent link

Direct link