Journal article
Efficiency of the foreign currency options market
Global Finance Journal, Vol.19(2), pp.157-170
2008
Abstract
This paper provides a new test of the efficiency of the currency option markets for four major currencies — British Pound, Euro, Swiss Frank and Japanese Yen vis-à-vis the U.S. dollar. The approach is to simulate trading strategies to see if the well-accepted no-arbitrage condition of put–call parity (PCP) holds in a trading environment. Augmented Dickey–Fuller and Philips–Perron tests are used to check for the presence of unit roots in the data, followed by a formal econometric analysis. The results indicate that the most currency option prices do not violate the PCP conditions, when transaction costs are allowed for.
Details
- Title
- Efficiency of the foreign currency options market
- Authors/Creators
- A. Hoque (Author/Creator)F. Chan (Author/Creator)M. Manzur (Author/Creator)
- Publication Details
- Global Finance Journal, Vol.19(2), pp.157-170
- Publisher
- Elsevier
- Identifiers
- 991005544412107891
- Copyright
- Elsevier
- Murdoch Affiliation
- Murdoch University
- Language
- English
- Resource Type
- Journal article
- Publisher URL
- http://www.journals.elsevier.com/global-finance-journal/
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